Personal Consumption Expenditure Expands

June personal consumption expenditure increased by 0.42% after climbing 0.36% in May and 1.00% in April, according to the most recent data release from the Bureau of Economic Analysis. Personal income rose by $29.3 billion in June, up by 0.2% over last month.

Consumption expenditure in second quarter grew at a steady pace, rebounding from a weak first quarter. Meanwhile, disposable personal income – income remaining after deducting personal income taxes- rose modestly 0.1% over the revised May estimate. Adjusted for inflation, both disposable personal income and personal consumption expenditure continued their long-term steady growth trends. Compared to June 2015, real disposable personal income rose 2% and real personal consumption expenditure increased 2.8%.

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As a result of spending outpacing income gains, personal savings rate fell under 5.3%, the lowest level since January 2014. The drop in savings rate, together with strong consumption growth, is likely to an acceleration of economic growth from the soft start of the year.

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