US personal income likely to have recovered in July

US personal income is expected to have recovered in July after growing marginally in the previous month. Meanwhile, in the second quarter, real consumer spending grew strongly by 4.4 percent, but spending might have started at a slower pace in the third quarter. In July, retail sales came in weak, with the headline figure stagnant and the control group also registering a flat reading.

However, spending on services keeps on growing at a decent rate and possibly assisted in pushing nominal spending in July to a 0.2 percent growth. As the headline PCE deflator is expected to have remained unchanged in July, real expenditures might have grown 0.2 percent, said Societe Generale in a research report.

In the meantime, personal income rose just 0.2 percent in June; however, it is expected to have improved by 0.5 percent in July, added Societe Generale. Private payrolls rose just 0.2 percent in July, whereas average hourly earnings increased 0.3 percent that should assist in stimulating private wages and salaries growth.

In the meantime, inflation data is expected to be disappointing. Given the PPI and CPI data in hand, the headline PCE deflator is likely to have remained unchanged in July, which might lead to the year-over-year rate dropping to 0.8 percent from 0.9 percent.

Meanwhile, the core PCE deflator might have increased by 0.06 percent; however, there is not insignificant risk that it might have rounded down to flat, according to Societe Generale. In either case, the annual rise in core PCE is anticipated to have eased to 1.5 percent in July from 1.6 percent in June. This would be the slowest growth rate in 2016, noted Societe Generale.