US Core PCE Meets Expectations; Consumer Spending Skyrockets 0.8% in July

Highlights

• PCE price index records 0.2% increase in July.
• Real PCE climbs by 0.6%, driven by goods spending.
• Personal income grows, consumer spending surges.

Price Index Movements

For July, the PCE price index went up by 0.2%. While goods prices dipped by 0.3%, services prices experienced a 0.4% rise. Excluding the volatile food and energy sectors, the PCE price index recorded a 0.2% increase. When contrasted with the same month from the previous year, the PCE price index surged by 3.3%. Remarkably, while goods prices dropped by 0.5%, the services sector saw a notable 5.2% ascent.

Real PCE Analysis

Real PCE, which strips out the effects of inflation, saw an overall increase of 0.6% in July. Goods spending led this rise with a 0.9% jump, with the “other” nondurable goods and recreational goods sectors acting as primary contributors. Within the services domain, the main drivers were food services, financial services, and housing utilities.

Personal Income and Consumer Spending

In July, personal income saw an increase of $45.0 billion, marking a 0.2% monthly growth. Concurrently, disposable personal income (DPI) – the total personal income minus current personal taxes – registered a marginal increase of $7.3 billion, which is less than 0.1%. The focus was also on personal consumption expenditures (PCE), with consumer spending shooting up by $144.6 billion, translating to a 0.8% surge.

Insights on Expenditures

Breaking down the surge in consumer spending, services took the lead with a whopping increase of $102.7 billion, dominated by financial services and insurance. This was primarily driven by portfolio management and investment advisory services. Other notable sectors contributing to this increase include housing and utilities, food services, and health care. On the goods front, spending saw an increment of $41.9 billion, mainly from “other” nondurable goods, predominantly pharmaceuticals and recreational items.