Americans splash out in June but price growth ebbs

Americans took out from their savings again to finance increased spending at the end of the second quarter.

According to the U.S. Department of Labor, in seasonally adjusted terms, personal incomes grew by 0.3% month-on-month in June (consensus: 0.5%).

Personal consumption expenditures meanwhile jumped by 0.5% on the month (consensus: 0.4%).

In parallel, the personal savings rate declined by three tenths of a percentage point versus the month before to 0.3%.

Month-on-month income and PCE growth for May were both revised up by one tenth of a percentage point to 0.5% and 0.2%, respectively.

On the inflation front, the headline PCE price deflator fell back from a year-on-year rate of 3.8% in May to 3.0% (consensus: 3.1%).

At the core level it retreated from 4.6% to 4.1% (consensus: 4.2%).

In comparison to May, both headline and core PCE prices increased by 0.2%. Core prices rose in line with economists's forecasts.

"The June core print rose by just 0.165%, narrowly avoiding the first 0.1% print since July 2022. But the bigger news here is that PCE core services ex-housing—the Fed’s current fixation—rose by just 0.2% for the second straight month," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"It increased at a 3.7% annualized rate in the second quarter, the first sub-4% print on this basis since last September. The rollover in CPI core services ex-rents already is clear, but the PCE measure is constructed slightly differently, and the two do not always move in lockstep."

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