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Financial News: U.S. Personal Spending Jumps Even As Personal Income

U.S. Personal Spending Jumps Even As Personal Income Edges Only Slightly Higher

08/30/2019 - 09:16:00 (RTTNews)

(RTTNews) - While the Commerce Department released a report on Friday showing U.S. personal income crept up by less than expected in the month of July, the report still showed a bigger than expected increase in personal spending during the month.

The Commerce Department said personal income inched up by 0.1 percent in July after climbing by an upwardly revised 0.5 percent in June.

Economists had expected personal income to rise by 0.3 percent compared to the 0.4 percent increase originally reported for the previous month.

Disposable personal income, or personal income less personal current taxes, also ticked up by 0.1 percent in July after rising by 0.3 percent in June.

Meanwhile, the report said personal spending grew by 0.6 percent in July after an unrevised 0.3 percent increase in June. Personal spending had been expected to climb by 0.5 percent.

Real spending, which is adjusted to remove price changes, increased by 0.4 percent in July after edging up by 0.2 percent in June.

With spending rising by much more than income, personal saving as a percentage of disposable personal income slumped to an eight-month low of 7.7 percent in July from 8.0 in June.

"The more modest 0.1% m/m rise in personal incomes in July highlights that the recent strength of consumption is unlikely to last much longer," said Andrew Hunter, Senior U.S. Economist at Capital Economics.

"With employment growth now slowing quite markedly, we continue to expect consumption growth to slow to a more sustainable 2.0% annualized in the fourth quarter, with overall GDP growth slowing to only around 1%," he added.

A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth was unchanged from the previous month at 1.6 percent.

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