 | Personal income declined 0.1% in August |
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| Posted Under: Data Watch • PIC |
Implications: Considering all the financial volatility in August, personal spending held up well, continuing to grow on a nominal, or cash, basis and remaining unchanged even with inflation factored in. What matters is what comes next and auto analysts estimate that sales increased substantially in September. In turn, this suggests the softness in August was temporary. The negative surprise was the decline in personal income. However, these data were probably affected by the temporary Verizon strike in August. As a result, we expect a rebound in income in September. On the inflation front, overall consumption prices rose 0.2% in August and are now up 2.9% from a year ago. Meanwhile, "core" consumption prices, which exclude food and energy, were up 0.1% in August, are up 1.6% in the past year, and are up at a 2.2% annual rate in the past six months. Given loose monetary policy, we expect inflation to get worse in the year ahead. In other recent news, the Labor Department says it thinks it underestimated payroll gains from March 2010 to March 2011 by 192,000 or 16,000 per month. Labor issues an estimate like this every year based on analysis of jobless claims. On the housing front, pending home sales, which are contracts on existing homes, declined 1.2% in August. The biggest decline came in the Northeast, where flooding may have temporarily deterred homebuyers. The best news this morning was that the Chicago PMI, which measures manufacturing activity in that region, increased to 60.4 in September from 56.5 in August. The consensus had expected a decline. The sub-indexes for production, employment and new orders all soared above 60.
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