ECONX July Personal Income Falls 0.7%

July personal income fell 0.7%. The decline was due largely to the lower amount of fiscal stimulus checks as compared to June and May. Excluding the impact from the fiscal stimulus, real disposable personal income was up 0.5% in July, compared to 0.3% in June and 0.4% in May.

Wage growth actually accelerated in July to a 0.3% gain compared to 0.2% June. The weak income number should not be seen as a sign of underlying weakness... Personal consumption expenditures (PCE) were up 0.2% for July.

That was as expected. It was weak relative the 0.6% increase in June and 0.8% in May, but was expected given the soft July retail sales number. Our expectation is for a solid increase in August spending... The PCE deflator at 0.6% reflects higher gas prices in July compared to June and won't cause great concern as gas prices will move lower for August and probably September (the current average price is below the August average).

The core PCE was up 0.3% for the second month in a row. This was in-line with expectations, and consistent with the core July CPI gain. The market does not typically react sharply to these data. That should be the case again today as the numbers are broadly in-line with expectations, reflecting already recognized July data on retail sales and inflation.

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