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Macro Pulse highlights recent activity and events expected to affect the U.S. economy over the next 24 months. While the review is of the entire U.S. economy its particular focus is on developments affecting the Forest Products industry. Everyone with a stake in any level of the sector can benefit from
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Saturday, September 11, 2010

July 2010 Personal Income and Outlays, Retail Sales and Consumer Debt: Spending Outpaces Incomes

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Bureau of Economic Analysis data revealed that personal consumption expenditures (PCE) outpaced disposable personal income (DPI) in July. DPI increased $17.6 billion (0.2 percent) while PCE rose by $44.1 billion (0.4 percent) relative to June. Year-over-year percentage gains in consumer spending have exceeded incomes during the most recent five months, although -- except in May -- the spread has not been very great.

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Retail-sale activity paralleled PCE in July, rising 0.4 percent compared to June -- the first increase in retail sales in five months. Most of the gain came from vehicle sales and higher gasoline prices; excluding those two sectors, retail sales were down 0.1 percent.

Although the personal saving rate declined to 5.9 percent in July (from 6.2 percent in June), consumers are perceived as remaining “very cautions.” For example, J.C. Penney and J. Crew have both lowered their annual earnings outlooks. "The continued economic uncertainty we're seeing is leading us to take a more conservative outlook for the second half of the year," Mickey Drexler, J. Crew’s CEO, said on a conference call.

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Despite the perception of caution, total consumer debt outstanding is in the process of leveling off after retreating since mid-2008. And in fact, non-revolving debt increased for a third month in July. So, while consumers may not be loading up debt on their credit cards, they are still “shelling out” for bigger-ticket items (e.g., the vehicles mentioned above).

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