Headline inflation in June as measured by the PCE was flat m/o/m as expected but due to rounding the y/o/y print of 1.4% was one tenth more than expected. The core rate of up .1% m/o/m was as expected and the y/o/y increase of 1.5% was also one tenth above the forecast due to rounding. Services inflation again offset a drop in the prices of goods.
As for income in June, it disappointingly did not change vs May whereas the estimate was for a gain of .4%. However, digging within the data showed private sector wages/salaries did rise by .4% m/o/m. Spending was mediocre as it rose by just .1% m/o/m as expected but May was revised up by one tenth. Again, spending on services offset a drop in spending on goods, both durable and non-durable. The savings rate fell one tenth to 3.8% and is hovering near the lowest level in nearly 10 years and is well below the 10 year average of 5.5%. See chart. This low level of savings comes just as revolving credit outstanding (mostly credit cards), is just a hair shy of the highest level reached back in 2008.
Bottom line, this data was mostly captured in Friday’s Q2 GDP report and why it’s not market moving. The inflation data of course and its recent moderation has everyone downplaying what the Fed will do on rates but it’s not going to impact the timing of QT with the end result being the same, a tightening of policy again in September.