- Personal Spending for June rose .8% versus estimates of a .8% increase and an unchanged reading in May.
- PCE Core(MOM) for June was unchanged versus estimates of a .1% increase and a .2% gain in May.
- Factory Orders for June rose 1.0% versus estimates of a 1.0% increase and an upwardly revised 3.6% increase in May.
BOTTOM LINE: Incomes are now up 6.6% over the last year, significantly higher than the rate of consumer inflation which is currently around the long-term average of 3.0%. This is one of the most underappreciated aspects of the current economic environment.
The .8% gain in Personal Spending was the largest rise since July 2004. Spending on long-lasting items such as autos and furniture rose 3.3%, the most since May 2004. This is a big positive considering record energy prices.
The fact that the PCE Core, the Fed’s favorite inflation gauge, was unchanged in June is also a big positive. I continue to believe the Fed is raising rates to have ammunition for a future emergency and quell worries over housing froth, not because they are overly worried about inflation.
The increase in factory orders is further evidence of an improving manufacturing sector. The current streak of factory gains is the longest since the November 1998 to February 1999 period. Orders for non-defense capital goods excluding aircraft, a measure of future corporate investment, rose 3.9% in June which was the largest gain since January.
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