Core PCE for July was about as expected when we include the June upward revision. Versus last year headline PCE was up by 1% vs .9% in June. Core PCE was up by 1.3% vs 1.1% in the month prior. Services continues to see steady price gains as it rose 1.8% y/o/y for a 3rd straight month. Goods deflation was still evident but less so and where I’m expecting upside in coming quarters.
Also within the data was the July income and spending numbers. They both surprised to the upside with income up .4% m/o/m vs the estimate of down .2%. Government transfer payments were an obvious help but that has changed in August with the expiration of extended benefits. Private sector wages/salaries rose 1.4% m/o/m and which compares to 1.2% in February. Spending was up 1.9% m/o/m, 3 tenths more than expected and June was revised up by 6 tenths. Purchases of durable goods led the way as we’ve seen with auto’s, building materials, sporting goods, etc… This should lead to an uptick in GDP forecasts. We’ll see how August plays out though without the extra $600, partly offset hopefully by more people finding jobs.
The further reopening of the global economy was reflected in the July goods trade data where exports rose 11.8% m/o/m after a 14.3% rise in June. Imports jumped by 11.8% m/o/m after increasing 5.1% in June. On an absolute basis for perspective, exports totaled $115b vs $136b in July 2019 and vs $137b in February 2020. Imports were $194b vs $196b in February 2020 and $210b in July 2019. Bottom line, with the goods deficit at $79.3b vs the estimate of $72b, GDP estimates will be trimmed slightly for Q3.