Income, Spending, & Prices All Up In July

July was a mixed bag for the economy with spending, prices, and prices all up for the month, according to the latest data from the Bureau of Economic Analysis…(BEA)

  • Personal Income was up 1.1% for the month to $20.6T.
  • Government transfers were up 3.3% for the month to $4.14T.

What people did with that extra income was also a mixed bag with some spending but more deciding to save as savings jumped in July…

  • Personal spending saw a slight 0.3% increase to $15.8T
  • Personal savings saw a much bigger jump at 9.7% to $1.72T

On the inflation front, prices saw slower growth month-over-month but prices are still rising to the chagrin of consumers…

  • M-O-M: Consumer prices rose 0.4% from which is down from the 0.5% increase we saw in June. Core PCE saw a slightly smaller increase at 0.3%.
  • Y-O-Y: Consumer prices were up 4.2% compared to the same time last year and was the highest number since 1991. Core PCE was up 3.6% from July 2020.

Inflation was clearly the big takeaway from the July report…

  • Ken Tumin said on TwitterThe Fed may still claim inflation is transitory based on today’s PCE data, but they’ll have to admit they underestimated the rise in inflation this year.”
  • Marc Goldwein was even less optimistic “PCE price index is up 3.5% in the first 7 months of the year – meaning we’re now about the Fed’s median forecast for the *entire* year. If inflation moderates to an annualized 2% for the rest of the year, we’ll be at 4.3% or 4.4% on the year.”

Worst case scenario is inflation stays elevated above 4%. The best-case scenario is inflation falls but remains higher than anticipated. Any way you look it, the Fed models have been wrong and Powell and others should start admitting this for consumers and the economy’s sake.