Thursday, August 31, 2006

July Personal Income and Outlays

by Bill McBride on 8/31/2006 12:41:00 PM

The BEA reported Personal Income and Outlays today for July. There are several positives for the economy in this report.

Click on graph for larger image.
The monthly savings rate can be event driven; both Hurricane Katrina, in August 2005, and the Microsoft special dividend, in December 2004, impacted the monthly savings rate.

The savings rate for July was negative 0.9%. This is the sixteenth consecutive month of negative savings. But the good news is the savings rate for recent months has been revised upwards - so the U.S. consumer is in slightly better shape than previous thought.

Back in July, Chairman Bernanke commented:

"... favorable fundamentals, including relatively low unemployment and rising disposable incomes, should provide support for consumer spending."
In July I was concerned that real disposable personal income had stalled. This report, including the revision for June, shows that real DPI has been rising for the last two months.

Also personal consumption expenditures rose sharply in July, including spending for durable goods. Reports of the death of the American consumer are premature!

On jobs, there was more weakness in the Help Wanted Index
The number of help-wanted ads in U.S. newspapers fell in July, a private research group said on Thursday.

The Conference Board said its gauge measuring help-wanted ad volume in the United States was 32 in July, down from a revised 34 in June. The index was originally pegged at 33. It was 39 a year ago.
...
Online want-ad volume fell to about 2.33 million in July, from about 2.44 million in June, the Conference Board said. Online ads reached 2.35 million in May.
knzn has been tracking the job indicators, including the Conference Board and the Monster Employment Index. Overall the job market appears to be weakening and the employment report tomorrow will be interesting. I think it will show the first significant decline in residential construction employment.

Best to All.