US DATA
Personal income and spending were a little softer than expected in August on a nominal basis, but in "real" terms this was a solid report and data going back to the start of the year were largely revised in a stronger direction. Overall, income and spending appear to have been on a cooling trajectory in nominal terms since early 2024, but the simultaneous pullback in inflation means they remain solid on a historic basis in real terms.
- Nominal incomes rose by 0.2% M/M in August, half the 0.4% expected and a deceleration from 0.3% in July. Likewise, nominal spending rose 0.2% vs 0.3% expected (and 0.5% prior). But at least some of the miss was due to a lower set of inflation prints than widely expected: core PCE at 0.1% (vs 0.2% exp.), headline 0.1% (as expected).
- That resulted in a rise in real personal spending of 0.1% M/M - right on consensus (a slowdown from 0.4% prior). Indeed real spending almost rounded up to 0.2% (was 0.147%), suggesting a modest beat. Real disposable income meanwhile rose 0.1% M/M, with large revisions to Q1 figures.
- Note that we knew about these historic dynamics from Thursday's quarterly Q2 GDP print and revisions - including higher personal incomes (and much higher savings rates). The Jul-Aug data suggests a moderation vs 1H income dynamics, but not much of one in spending. Real disposable income is running at a 3M/3M pace of 1.9%, down from 4.2% averaged in H1; while real spending has averaged 3.2% 3M/3M in Jul-Aug, vs 2.6% in the first half of the year.
- Nominal spending has slowed, but the pullback in inflation means that spending in real terms remains healthy: amid goods deflation, real goods spending momentum has picked up to 2021 levels (running at 4.8% 3M/3M ar in Q3 so far), and while real services consumption momentum has slowed to 2.5% 3M/3M ar vs 3.4% in H1, that's still above the pace in mid-2023 and it's still running at a 3.0% Y/Y clip.
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