Personal spending rose 0.3% in July, slightly less than expected, perhaps underscoring the fragility of a US consumer beset by inflation concerns and Delta variant jitters.
That’s the boilerplate copy — the obligatory, superficial assessment that politely nods to the macro narrative du jour. Take it with a grain of salt. The breakdown admits of nuance (more below).
Although the headline print was only marginally below the 0.4% consensus, it marked a fairly sharp deceleration from June, when spending rose 1.1% in the final month of the second quarter (figure below).
The range, from five-dozen economists, was -0.7% to 0.9%.
Incomes, meanwhile, rose far more than expected. The 1.1% increase last month was nearly quadruple consensus, and near the top-end of the range.
Spending on services increased nearly $103 billion last month, while outlays for goods dropped more than $60 billion. The jump in services spending was widespread, the government said. Food services and accommodations led the way. On the flip side, the decrease in goods spending was similarly broad-based, led by motor vehicles and parts, recreational goods and vehicles, as well as clothing and footwear.
The data comes on the heels of a lackluster retail sales report for July and signs that consumer sentiment is buckling as prices rise and Americans lose faith in the vaccination push. The final read on University of Michigan sentiment was due later.
Friday’s government data showed transfer payments posted their first monthly rise since March, as social benefits reflected the new advance Child Tax Credit payments.
The y-axis on the figure (above) was trimmed for clarity.
On the inflation front, PCE prices rose 0.4% MoM, inline with estimates and 4.2% YoY. The increase in core prices was also inline at 0.3% from June.
Summing up Friday’s data, one rates strategy team called it “a remarkably as-expected release.”
Quick thought about consumer sentiment. It is based on 500 phone calls. Recent research conducted in the wake of the 2016 presidential polling whoopsie-daisy indicates that democrats are more likely to participate in polling and survey research for reasons I’ll leave to your imagination / common sense. Infer from that what you will, but my read-between-the-lines is that the sentiment survey under-accounts for people who DGAF about the delta variant. Think about all the people you see in businesses without a mask on. Yeah, them. This might be complicated by the tendency for democrats to over-state the buoyancy of the economy under a democratic leader, but that might be partially neutralized by the flip-side of that scenario. Anyway, retail businesses reporting lights out results, services spending going up, everywhere I go is packed, delta possibly peaking. Just saying, back to school spending might be better than these sentiment indicators are telegraphing.
I understand it’s become commonplace to dismiss survey research, but the statements offered by Mr, Stevenson are simply not accurate.
Here’s what the AAPOR report on 2020 polling says about over-representation of Democrats (or any group) in political polls:
“…identifying conclusively why polls overstated the Democratic-Republican margin relative to the certified vote appears to be impossible with the available data. Reliable information is lacking on the demographics, opinions, and vote choice of those not included in polls (either because they were excluded from the sampling frame or else because they chose not to participate), making it impossible to compare voters who responded to polls with voters who did not.”
Bottom lime, the “Democrats are more likely to participate in polls” line is a hypothesis lacking corroborating data.
Second, if you visit Michigan’s site, you can find the itime series for the CSI , Current Conditions and Economic Expectations inidces broken out by political affiliation. (https://data.sca.isr.umich.edu/fetchdoc.php?docid=68093) Democratic-identfying respondents generated a far higher score than Republican- or Independent-identifying respondents in the most recent month and, in fact, as they have all year.
That’s consistent with reports as recent as last week on which counties are doing best economically (https://www.bloomberg.com/news/articles/2021-08-26/what-s-driving-america-s-economic-output-vaccinated-blue-counties-biden-won).