U.S. personal income and spending come in below expectations in June

U.S. personal income and spending report for the month of June came in weaker than anticipated. In June, personal income came in flat, as compared with consensus expectations of a strong rise of 0.4 percent sequentially. Wages and salaries, which is the main component of personal income, rose 0.4 percent sequentially. Most of the weakness in personal income was mainly due to the personal income receipts on assets category that dropped 1.7 percent sequentially – both interest and dividend income drop sharply in June after having reported solid rises in the previous month.

“We are inclined to look through this volatility as just noise in the data and take signal from the solid print in wages and salaries”, noted Barclays in a research report.

Nominal personal spending rose 0.1 percent sequentially. Personal spending adjusted for price changes was flat on the month. The savings rate dropped a bit to 3.8 percent. After rising to 4.1 percent in February, the savings rate has been moving lower in recent months amidst a rebound in consumption growth.

The inflation side of the report was widely as expected. Headline PCE was flat on the month, as a modest rise in core PCE was countered by dropping prices of food and energy. Core PCE rose 0.1 percent sequentially, in line with expectations, food prices dropped 0.1 percent and energy prices were down 1.7 percent. This brings the year-on-year rates for headline PCE to 1.4 percent and for core PCE to 1.5 percent. The annual rates of PCE and core PCE inflation were both upwardly revised to 1.5 percent for May, giving a strong starting point for June, stated Barclays.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 58.832. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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