Personal income rose 0.30% to $52.5 billion in August 2015
Personal income and spending record the earnings received by Americans and the amount that’s saved. According to the BEA (U.S. Bureau of Economic Analysis), personal income rose 0.30% to $52.5 billion in August 2015. This was below the consensus estimate of 0.40%. It was also lower than the prior month’s revised level of 0.50%. The main components of personal income are wages and salaries. They fell by 18.70% to $35.6 billion in August. The private sector recorded a fall of 21.30% while government wages and salaries rose by 7.90% in August 2015.
Consumer spending rose 0.40% to $54.9 billion in August 2015
PCE (personal consumption expenditure) rose 0.40% to $54.9 billion. It was higher than the consensus estimate of 0.30%. It was also in line with the revised level the month before. Consumer spending is gaining momentum due to rising disposable income, falling crude prices, and cheap borrowing costs. Over the past year, the Consumer Staples Select Sector SPDR ETF (XLP) rose by 5.30% as of September 28. Personal product companies like Altria Group (MO) and Kimberly-Clark (KMB) rose by 19% and 5.10%, respectively, over the past year as of September 28.
Consumer spending increases growth expectations
High consumer spending with rising income has already boosted the GDP (gross domestic product) estimate to 3.90% for the second quarter. With cheap gasoline prices and the low cost of borrowing, the US economy is gaining momentum. Even the improvement in business and consumer confidence reflects the encouraging household sentiments towards the economy and the reinforcement of fiscal markets.
Improved consumer sentiment will likely improve home sales data. Pending home sales data are out. The data provide insight on the housing sector. We’ll discuss this in the next part.