US: Consumers ok, inflation absent - ANZ

Research Team at ANZ, suggests that with London out for a bank holiday, yesterday’s focus was on the US, where personal income and spending data suggest private consumption should continue to be the pillar of GDP growth in Q3.

Key Quotes

“Personal spending was up 0.3% m/m, while personal income growth rose 0.4% m/m. Compensation of employees grew at 0.5% m/m, matching the expansion last month and adding to April's 0.4% and March's 0.8% gains. Disposable income growth was up 0.4%, from 0.3%. On the spending side, durable good purchases rose 1.6%. Spending growth driven by durable purchases highlights elevated levels of confidence and bodes well for the Q3 consumption outlook.

The fly in the ointment: the Fed’s preferred measure of inflation – the core PCE deflator rose just 0.1% m/m, which saw the annual reading hold steady at 1.6% y/y. That’s not too far below the Fed’s 2% target, but it is still below target, and unfortunately, the trend since the beginning of the year has been down (or flat at best if you’re an optimist).”