U.S. Personal Income and Outlays – June 2018

Released Tuesday, July 31, 2018

Download PDF version herePersonal Income: +0.4% month-over-month (Cons: +0.4%), +4.9% year-over-year
Real Personal Consumption Expenditures: +0.3% month-over-month (Cons +0.4%), +2.8% year-over-year
Core PCE Price Index: +0.1% month-over-month (Cons: 0.1%), +1.9% year-over-year
Savings Rate: +6.8% month-over-month, +0.2 percentage point (ppt) year-over-year

Quick Take:
Personal income rose +0.4% month-over-month in June, in line with economists’ estimates. Year-over-year personal income growth was +4.9%, up from +4.6% in May. Wages and salaries, which make up approximately 50% of personal income, grew 4.8% year-over-year in June, slightly down from +5.0% in May.

Nominal personal consumption rose +0.4% month-over-month in June, in line with economists’ estimates. Nominal personal consumption growth in June was driven mostly by services (+0.6%), while goods consumption was flat. Goods spending, which makes up approximately one-third of personal spending, rose +5.4% year-over-year in June, the third highest level since February of 2012. Real personal consumption, grew +0.3% month-over-month in June. On a year-over-year basis, real personal consumption rose +2.8% as of June, up from +2.6% in May and matching the highest reading since March of 2017.

The savings rate was unchanged in June at 6.8% after falling -0.1 ppt in May.

The June Personal Income and Outlays report also included detail on the BEA’s annual revisions. The dollar value of Personal Income was revised up compared to the pre-revision readings over the last decade with the largest revisions from Q4 of 2016 through May 2018. In fact, the May 2018 Personal Income reading was revised up 2.9% compared the previous estimate. These upward revisions in recent years came from a number of categories including Wages & Salaries, Income from the Self-Employed and Dividend Income. The higher level of income along with a modest decline in Outlays resulted in the May 2018 savings rate being revised from 3.2% up to 6.8%. This higher level of income, together with continued healthy readings on income growth, indicate that consumers have the wherewithal to increase their spending in the period ahead.

Notable Data:
Real disposable income, an indicator of purchasing power, grew +0.3% month-over-month in June and rose +3.1% year-over-year, up from +2.7% in May.

Nominal spending remained healthy in the largest individual categories including Housing & Utilities, Health Care, and Insurance & Financial Services, growing +0.5%, +0.5%, and 0.3% month-over-month in June. Housing & Utilities rebounded from a -0.5% decline in May. With Wages & Salaries up +4.8% year-over-year and nominal consumer spending up +5.1% year-over-year, the outlook for personal consumption remains positive on the back of a healthy labor market.

On the inflation side, month-over-month growth for the core PCE price index was +0.1% in June. Year-over-year growth was +1.9%, which is tied for the second highest level of growth since the beginning of 2012. On a 6-month annualized basis, core PCE price growth was up 2.1% as of June.