Within the past hour, the Commerce Department has reported that personal income increased by 0.3% in July and that personal consumption expenditures rose by 0.4% during the same month. Both of those metrics were largely in line with expectations.
Overall, data for June were revised downward on the income side from a herteofore estimated gain of 0.5% to an increase of 0.3%. However, the latest rise made it eight months in a row that this category had shown improvement.
Consumer spending, as noted, jumped by 0.4% last month, which was a notable improvement from June, when such spending was flat. Personal consumption expenditures, which account for some two-thirds of aggregate economic output, meantime, had fallen by 0.2% in May. These earlier problems help to explain the meager 1.7% increase in consumer spending in the second quarter and the overall gain of a like amount in GDP for that period. Spending, by comparison, had been up by a more fomidable 2.4% during the first three months of this year. Weaker demand for cars and clothing contributed to the dimintion in spending last quarter.
On the whole, our sense is that the economy is now improving--especially with regard to housing where yesterday the National Association of Realtors reported a nice increase in pending home sales last month. That report followed by one day a survey showing a rise in home prices in 18 of the nation's 20 largest cities. Also, the second-quarter GDP increase, while disappointing in the absolute, at just 1.7%, was still better than the initially estimated gain of 1.5% for the period. On the other hand, the Conference Board on Tuesday came out with disquieting data showing that consumer confidence had fallen this month from a reading of 65.9 to 60.6.
Overall, this was a reasonable report and one that gives us confidence that the revised second-quarter GDP growth rate may mark the low point for the year, with upcoming third- and fourth-quarter gains in economic growth being closer to the 2.0% rate of gain in the first quarter. We would then expect a similar modest pace of increase in the opening half of 2013. This morning's reports by the nation's retail chains, which were decent, in the aggregate, give us some confidence that our more upbeat view of things might be on the mark. Will all of this that be sufficient to keep the Federal Reserve from undertaking additional monetary moves in the short term? That question may be answered tomorrow when Fed Chairman Ben Bernanke speaks at the annual monetary symposium at Jackson Hole, Wyoming.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.