The Personal Income and Outlays report for July 2023 has been released here by Bureau of Economic Analysis today . Below you will find some salient features of this report alongwith some analysis of the figures
|Percent change from preceding month|
|Disposable personal income:|
|Chained (2012) dollars||0.3||0.2||0.4||0||-0.2|
|Personal consumption expenditures (PCE):|
|Chained (2012) dollars||0||0.3||0.1||0.4||0.6|
|PCE, excluding food and energy||0.3||0.3||0.3||0.2||0.2|
|Percent change from month one year ago|
|PCE, excluding food and energy||4.6||4.6||4.5||4.1||4.2|
Source: BEA Website
Positive Signs of Economic Activity
The latest Personal Consumption Expenditure report indicates a moderate uptick in economic activity. Personal income saw a $45.0 billion (0.2%) rise in July, contributing to expanded consumer spending. Disposable personal income also saw a modest increase of $7.3 billion (less than 0.1%) after accounting for taxes. Notably, personal consumption expenditures surged by $144.6 billion (0.8%), suggesting a healthy consumer demand for goods and services. This trend signals potential economic growth, as consumers appear willing to spend, supported by higher income levels. It will be important to monitor these indicators over the coming months to assess the sustainability of this upward trajectory in economic activity.
Steady Inflation Amid Consumer Resilience
The PCE price index registered a 0.2 percent growth, indicating a slight uptick in overall consumer prices. When excluding the volatile categories of food and energy, the core PCE price index also saw a 0.2 percent increase, suggesting a relatively stable inflation trend. Real Disposable Personal Income (DPI) experienced a marginal decline of 0.2 percent in July, potentially impacting consumers' spending power. However, real Personal Consumption Expenditure (PCE) exhibited a more positive trend, rising by 0.6 percent. This growth was led by a solid increase of 0.9 percent in goods consumption and a 0.4 percent rise in services consumption. This data implies that while inflation is modest, consumer spending remains resilient, particularly in the goods sector, which could contribute to economic activity in the near term.
Spending Patterns and Sectoral Dynamics
The substantial $144.6 billion surge in current-dollar Personal Consumption Expenditure (PCE) during July was primarily driven by a robust increase of $102.7 billion in spending on services, accompanied by a notable $41.9 billion rise in spending on goods. Among services, key contributors to this growth included financial services and insurance, led by portfolio management and investment advice. Additionally, housing and utilities, food services and accommodation, and health care, particularly outpatient services, played significant roles. Within the goods category, the surge was led by "other" nondurable goods, including pharmaceuticals and recreational items, followed by food and beverages, notably groceries. The demand for recreational goods and vehicles also rose, especially for video, audio, photographic, and information processing equipment and media. These trends illustrate a diverse array of spending patterns, indicating consumer preferences across various sectors, and suggest potential implications for market dynamics and economic sectors.
In July, the PCE price index showed a 0.2 percent increase from the previous month. This growth was driven by a 0.4 percent rise in services prices, while prices for goods experienced a slight decline of 0.3 percent. Notably, food prices saw a 0.2 percent increase, and energy prices also ticked up by 0.1 percent. When excluding food and energy, the PCE price index still grew by 0.2 percent. This suggests a relatively steady inflation trend, where price changes are influenced by both goods and services
Comparing prices to the same month a year ago, the PCE price index for July displayed a more substantial increase of 3.3 percent. Notably, services prices surged by 5.2 percent, while goods prices saw a modest decrease of 0.5 percent. The rise in food prices by 3.5 percent contrasted with a significant 14.6 percent drop in energy prices. Excluding food and energy, the PCE price index still rose by 4.2 percent compared to the previous year, reflecting higher year-on-year inflation, influenced by ongoing price fluctuations and potential shifts in consumer spending patterns.
Driving Factors Behind Real PCE Growth
The notable 0.6 percent rise in real Personal Consumption Expenditure (PCE) during July stemmed from a 0.9 percent increase in goods spending and a 0.4 percent rise in services spending. Within the goods category, the most significant contributors to this growth were "other" nondurable goods, led by items like games, toys, and hobbies. Additionally, recreational goods and vehicles, particularly video, audio, photographic, and information processing equipment and media, played a substantial role in driving the upward trend. Within the services sector, the primary contributors were food services and accommodations, largely driven by food services themselves. Furthermore, strong growth was observed in financial services and insurance, specifically in portfolio management and investment advice, as well as in housing and utilities, primarily utilities.
Overall, This data reflects a diversified spending landscape, showcasing consumer preferences across a variety of sectors, potentially indicative of shifts in leisure activities and investment trends.
Header Photo by Karolina Grabowska