Personal income increased $71.7 billion or 0.4% in June according to the Bureau of Economic Analysis (BEA). Disposable personal income (DPI), an important indicator for retail spending, rose $65.3 billion, or 0.4%, and personal consumption expenditures (PCE) was up $57.1 billion, or 0.4% in the month. The personal saving rate–personal saving as a percentage of disposable personal income–was 6.8%, BEA reported.
Real DPI, adjusted for inflation, increased 0.3% in June and real PCE rose 0.3% compared to May. The PCE price index and the core index, which exclude the food and energy sectors, both grew 0.1% for the month. The core PCE had increased 0.2% in May. The increase in personal income in June primarily reflected increases in wages and salaries and personal dividend income, BEA said.
The $39.7 billion increase in real PCE in June was mainly due to a $36.4 billion hike in spending for services. The largest contributor to the increase was spending for food services and accommodations. Spending for goods increased $1.3 billion.
Clothing and footwear expenditures fell 0.6% in June to $394.1 million from $396.57 million in May. This followed four straight months of increased spending in the sector.
Clothing and related sales were down 2.5% in June from a month earlier, but rose 4 percent over June 2017. For the first six months of the year, the category increased 5.1% compared to the first half last year.
James Bohnaker, associate director of U.S. macro and consumer economics at IHS Markit, said, “The monthly profile of real personal spending through June suggests more growth in the third quarter—we have revised our estimate up 0.2 percentage points to 2.6%. More real personal spending, however, also suggests less inventory-building in Q3. On balance, this left our tracking forecast for Q3 gross domestic product (GDP) growth unchanged at 3.1%.”
“Improving household finances, fueled by solid wage gains and lower personal tax rates, will help bolster consumer spending through the remainder of 2018,” Bohnaker said.