Earlier this morning, the Commerce Department issued a report showing that in August, personal income and consumer spending had again failed to move in lockstep.
Specifically, personal income rose by a scant 0.1% last month, the second consecutive month in which this metric had risen by this tepid amount. (Earlier, the July income gain had been estimated at a more appreciable, albeit still modest, 0.3%.) All told, this makes it nine months in a row that income levels have increased. But for much of that time, especially during the latest two months, the gains have been minuscule.
At the same time, consumer spending posted its biggest increase in six months in August, with that survey result coming in at a gain of 0.5%. That exceeded by a tenth of a percentage point the July increase. However, a deeper look into the components of that increase showed that it was more a case of higher prices than a willingness on the part of Americans to splurge on an array of goods and services that prompted the decent headline spending number.
Personal consumption expenditures, which by definition measure purchases ranging from cars, to clothing, to food, and services such as health care and travel, matched the increase generally forecast by economists for last month. This was the second month in a row, as noted, that spending had strengthened, following two months in which expenditures had either been flat or declined. However, when inflation is factored in, spending rose by just 0.1% last month, thereby underscoring the caution in place among many Americans as they consider the troubled employment situation and the ongoing political gridlock in Washington in this very contentious election year.
These two reports further affirm the uneven nature of the business advance in place in our country as we move through 2012. All told, while the stock market and the housing recovery continue and consumer confidence is up nicely, we are seeing an array of metrics ranging from weak employment numbers, to tumbling durable goods orders, to weaker factory use and industrial production data that suggest the rate of economic gain is slowing. Yesterday's report of a downwardly revised second-quarter GDP growth estimate of 1.3% is indicative of the uninspiring economic trends now in place.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.