- Personal income fell by 1.3% in June after increasing by a revised 1.3% in May.
- Economist had been expecting income to decrease by about 1% compared to the 1.4% increase originally reported.
- Lower taxes and increased government benefit payments associated with the economic stimulus bill has contributed to the recent volatility in personal income, boosting in May by much more than in June.
- Excluding impacts of the stimulus bill, personal income edged down 0.1% in June compared to a decrease of less than 0.1% in May.
- Report also showed that personal spending rose 0.4% in June following a revised 0.1% increase in May.
- While the increase in spending exceeded economist estimates of 0.3% growth, the increase in spending in May was revised down from 0.3%.
- Although spending increased for the second consecutive month, it remains down 2.2% YoY.
- Spending has been down every month since December YoY.
- Drop in income combined with the monthly increase in spending caused the personal savings rate slip to 4.6% in June from 6.2% in May.
- Nonetheless, the savings rate remains well above the levels seen in recent years.
"Bottom line, spending remains punk and a tough labor market isn't helping. Plus, a change in the savings habits of Americans will keep a lid on spending that will hopefully be offset by exports and business investment.” – Peter Boockvar (equity strategist, Miller Tabak)
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