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August 03, 2010 at 08:00 PM
Bullish economic news was not to be found on Tuesday, August 3, as personal income and spending was reported to have held flat in June while wages paid fell. Pending home sales in the same month declined, and factory orders fell for the second month in a row.
According to the Commerce Department’s personal income and spending report for June, personal income increased $3.0 billion, or less than 0.1%, and personal consumption expenditures decreased $2.9 billion, or less than 0.1%. In May, income increased 0.3% and spending increased 0.1%. On a positive note for June, personal saving rose to 6.4% of disposable personal income, or $725.9 billion, versus 6.3%, or $713.9 billion, in May.
The unchanged figures for June fell below consensus forecasts of 0.2% for income and 0.1% for spending, according to Ian Shepherdson, chief U.S. economist for High Frequency Economics Ltd., in Valhalla, New York.
“In the private sector manufacturing wages fell 0.9%, the biggest drop since June 2009; the numbers are volatile, though, and the trend is upwards,” Shepherdson wrote in an analyst note. “In the government sector, the small dip in wages likely reflects the loss of temp Census jobs; we expect a further decline in July. Real spending in June rose 0.1%, as we expected; May and April revised down to be consistent with Q2 GDP data. If Q3 spending rises 0.1% per month too, the quarter as a whole will be up only 1.3% annualized. Finally note the 6.4% saving rate for June; highest since June ’09. More saving equals faster deleveraging.”
Pending home sales in June edged down, meanwhile, with near-term sales expected to be notably lower in contrast to the spring surge when buyers rushed to take advantage of the home buyer tax credit, according to the National Association of Realtors. The NAR’s pending home sales index dropped 2.6% to a reading of 75.7 based on contracts signed in June from 77.7 in May, which is 18.6% below June 2009 when it was 93.0.
Lower home sales are likely to continue in the short term, said NAR Chief Economist Lawrence Yun in the June news release.
“There could be a couple of additional months of slow home-sales activity before picking up later in the year, provided the job market continues to improve,” Yun said. “Over the short term, inventory will look high relative to home sales. However, since home prices have come down to fundamentally justifiable levels, there isn’t likely to be any meaningful change to national home values. Some local markets continue to show strengthening prices.”
