American consumers earned more in July, but they also spent more and saved less.
U.S. personal income in July increased 0.2%, or $30.0 billion, and disposable income increased 0.2%, or $17.6 billion, the Commerce Department reported Monday, August 30. Personal spending increased $44.1 billion, or 0.4%, while saving totaled 5.9% in July versus 6.2% in June.
Consumer spending was expected to rise only 0.3% in July, according to a Thomson Reuters poll of analysts.
“With the headline deflator up 0.2%, real spending rose 0.2%, a bit stronger than we had expected and a decent start to the third quarter,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics Ltd., in Valhalla, New York, in an analyst note. “The increase was driven by the jump in auto sales, which meant real spending on durable goods rose 1.2%, the best performance since March.”
Real spending on services rose 0.2%, in line with the underlying trend, while non-durables dipped 0.3%, Shepherdson noted.
“Even if real spending is unchanged in both August and September, the third quarter will be up 1.3% annualized,” he said. “We hope for a bit better, nearer 2%, thanks to the 3.7% rise in real after-tax incomes in the three months to July compared to the previous three months.”
Read about June’s personal income and spending data from the archives of InvestmentAdvisor.com.