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UBS: Firmer Real Consumption In July But Weak Trajectory Ahead

US OUTLOOK/OPINION
  • Ahead of monthly PCE on Friday, UBS forecast a 0.3% M/M rise in real consumer spending in July after the +0.1% in June, following the strength in retail sales.
  • However, they note that despite the two months' strength, “real consumption would have risen only 0.8% in the nine months through July; and real goods consumption would have fallen by 1.9%” with a relatively weak trajectory expected ahead.
  • They see nominal personal incomes rising 0.6% M/M for a third straight month, although with headline PCE prices expected to fall this would translate to a rise in real disposable income after net declines in the prior two months.
  • Headline PCE prices seen -0.04% M/M (cons. 0.0%) vs +0.12% M/M for core PCE (cons. +0.2%), the latter pushing the Y/Y from 4.77% to 4.56%, slowing further from the peak of 5.31% in February.
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  • Ahead of monthly PCE on Friday, UBS forecast a 0.3% M/M rise in real consumer spending in July after the +0.1% in June, following the strength in retail sales.
  • However, they note that despite the two months' strength, “real consumption would have risen only 0.8% in the nine months through July; and real goods consumption would have fallen by 1.9%” with a relatively weak trajectory expected ahead.
  • They see nominal personal incomes rising 0.6% M/M for a third straight month, although with headline PCE prices expected to fall this would translate to a rise in real disposable income after net declines in the prior two months.
  • Headline PCE prices seen -0.04% M/M (cons. 0.0%) vs +0.12% M/M for core PCE (cons. +0.2%), the latter pushing the Y/Y from 4.77% to 4.56%, slowing further from the peak of 5.31% in February.