Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  Personal income up 0.1% in June; personal consumption down 0.2%
Posted Under: Data Watch • PIC
Supporting Image for Blog Post

 
Implications:  Income and spending both came in below expectations in June, in part due to a steep (and what now appears to have been a temporary) drop in commodity prices.  "Real" (inflation-adjusted) personal income was up a solid 0.3% in June.  Real personal spending was unchanged but will be one of the last greatly affected by the supply-chain disruptions from Japan.  Later today automakers will report on car and light truck sales in July and those figures should show a rebound that will boost the consumer spending data a month from now.  Although overall consumption prices declined in July due to commodities, the Federal Reserve can't see the report as vindication.  "Core" consumption prices, which exclude food and energy, increased 0.1% in June and are up at a 2.2% annual rate in the past three months.  That is above the Fed's target of 2%.  The Fed must be confused about how core inflation could be rising when the unemployment rate is above 9% and capacity utilization in the industrial sector is below 80%.  In their worldview, core inflation should only be rising when resources are constrained, and we're not even close to that environment in their thinking.  Over the long run, we think consumer spending should strengthen for a number of reasons.  Consumer balance sheets are healthier and financial obligations (monthly payments like mortgages, rent, car loans/leases, as well as other debt service), are the smallest share of disposable income since 1994.  Meanwhile, the underlying trend in worker income continues in a favorable direction, with real private-sector earnings (wages, salaries, and small business profits) up 2.1% in the past year.

Click here to view the entire report.
Posted on Tuesday, August 2, 2011 @ 10:54 AM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.