After re-accelerating at the end of the second quarter, personal spending in the US picked up further at the beginning of Q3.
That’s according to closely watched data released on Thursday.
Spending rose 0.8% in July, the BEA said. That was ahead of consensus and matched the highest estimate from nearly five-dozen economists.
Real spending increased 0.6%, also more than anticipated.
The robust read on consumption comes at a time when investors would prefer cooler data at the margins. As JonesTrading’s Mike O’Rourke put it, “Markets have been clamoring for ‘soft, but not weak’ economic data in order to keep the Fed on the sidelines.”
There was nothing “weak” about July’s spending numbers, and it’d be hard to describe the figures as “soft.” But with a below-consensus JOLTS headline in hand, as well as a cooler read on private sector hiring and some indication that consumer sentiment deteriorated this month, markets were probably in a position to take the brisk spending data in stride.
Incomes rose 0.2%, less than the 0.3% consensus expected. The saving rate in July was 3.5%, the BEA said.
As for prices, both headline and core PCE rose 0.2% MoM, in line with expectations. The YoY prints were 3.3% and 4.2%, respectively, also consistent with forecasts.
On a three-month annualized basis, headline PCE is now back to target.
Core services ex-housing — the “supercore” measure the Fed is eying closely — rose 0.46% last month. That’s too hot, but the proximity to payrolls Friday (and the fact that traders are now looking ahead to August CPI, not back to July PCE) robbed Thursday’s update of its market-moving potential.
Meanwhile, jobless claims were a nonevent. Again. Initial claims were 228,000 in the week to August 26, 7,000 less than expected. Continuing claims were higher than forecast.
The burden of proof for sundry recession narratives based on torturous examinations of the weekly claims series still rests with the doomsayer crowd. At some point, your prediction has to pan out, otherwise you’re just talking for the sake of it.
That effort (to divine a recession from jobless claims data which simply isn’t recessionary) is starting to feel a bit like the “stocks are going to revisit the October lows” thesis. Maybe there’s something to be said for it, but if you held your breath, you’d be dead by now.
