Consumers go on the defensive: as their income flattens, their spending stalls

Source: Calculated Risk

The operative term is certainty. People, business, and policymakers lack it, so they all behave defensively--which makes for self-fulfilling prophecies--none of them encouraging. The Bureau of Economic Analysis this morning released its June report on personal income and outlays, an analysis economist pay close attention to since it is the fever-line tracking what two-thirds of the American economy is doing. The data shows personal consumption expenditures falling (by 0.2%), which is not what one is supposed to see happening in an economic recovery period. Calculated Risk's Bill McBride writes, "Real PCE has declined for three straight months - this was expected based on the weak GDP report, but this is very weak."

The BEA released the Personal Income and Outlays report for June:

Personal income increased $18.7 billion, or 0.1 percent ... Personal consumption expenditures (PCE) decreased $21.9 billion, or 0.2 percent.
...
Real PCE decreased less than 0.1 percent. ... The price index for PCE decreased 0.2 percent in June
PCE decreased 0.2 in June, and real PCE decreased less than 0.1% as the price index for PCE decreased 0.2 percent in June. On a quarterly basis, PCE barely increased in Q2 from Q1 (this was in the GDP report Friday).

Note: The PCE price index, excluding food and energy, increased 0.1 percent.

The personal saving rate was at 5.4% in June.

Personal saving -- DPI less personal outlays -- was $620.6 billion in June, compared with $581.7 billion in May. Personal saving as a percentage of disposable personal income was 5.4 percent in June, compared with 5.0 percent in May.

Real PCE has declined for three straight months - this was expected based on the weak GDP report, but this is very weak.

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