- Personal Income for May rose 1.9% versus estimates of a .4% gain and an upwardly revised .3% increase in April.
- Personal Spending for May rose .8% versus estimates of a .7% gain and an upwardly revised .4% increase in April.
- The PCE Core for May rose .1% versus estimates of a .2% increase and a .1% gain in April.
- Final Univ. of Mich. Consumer Confidence for June was 56.4 versus estimates of 56.7 and prior estimates of 56.7.
BOTTOM LINE: US consumer spending rose more than forecast in May as tax rebates drove the biggest gain in incomes in almost three years, Bloomberg reported. This data indicates that 2Q GDP will accelerate from 1Q’s 1.0% rate. Americans used their stimulus checks to buy electronics, clothes and furniture, according to the data. Economists at Morgan Stanley estimated 2Q growth at 1.6%, up from a prior estimate of a .8% gain. Disposable income, or the money left over after taxes, surged 5.7%, the most since May 1975. The US savings rate jumped to 5%, the highest since March 1995. About $70.8 billion worth of tax rebate checks were distributed through June 20, which leaves about $37 billion left to hit. The core PCE, the Fed’s preferred gauge of inflation, rose 2.1% year-over year versus the 20-year average of 2.4% and down from 2.5% in February of last year. I expect incomes and spending to exceed estimates again for June and core inflation to remain tame. The US Dollar Index is .08% lower and the 10-year yield is declining 3 basis points on today’s reports. The 10-year TIPS spread, a good gauge of inflation expectations, is rising 1 basis point to 2.55%, which is around the average for the last four years. This is also still down 13 basis points from 2.68% on March 13th.
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