Consumer – Income, Spending, and Savings Revisions

Personal income, spending, and savings data revisions were released last week. This update changed the level of consumer income meaningfully, resulting in higher y/y growth rates on a nominal and inflation-adjusted basis. Notably, spending data featured smaller upward revisions than income, leaving the personal saving rate much higher than what had initially been published.

We are highlighting this setup because the trajectory of consumer activity has significant implications for the path of economic growth and inflation moving forward. Therefore, continued positive consumer data could lead to a shift in expectations for the pace and magnitude of rate cuts beyond the fourth quarter.

Starting with nominal personal income, the dollar amount rose to $24.85 trillion in August, up from $24.80 trillion in July. The callout here is that July’s level had initially been reported at $24.02 trillion, almost $800 billion below the revised print. On a y/y basis, July was previously released at 4.5% y/y and for nearly all of 2024, the y/y run rate was close to the 2015-2019 average of 4.4%. Following revisions, we saw July was 140 basis points higher at 5.9%, and while August did decelerate to 5.6%, its current growth rate is not consistent with recessionary economic environments.

Source: Macrobond

On an inflation-adjusted basis, disposable personal income had come in at 1.1% in July. This was revised upward to 3.2% and slowed to 3.1% in August. Like the nominal data, on a trend basis this series is in a much better position following revisions.

Source: Macrobond

Consumer spending was revised up by $270 billion for the month of July and August increased to $19.90 trillion. This smaller relative revision pushed the personal saving rate up to 4.8% in August. This is important because July’s initial print was 2.9%, close to the lows made in 2008. The updated data paints a much different consumer picture in terms of potential spending capacity.

Source: Macrobond

As we move into the fourth quarter, we will continue to monitor trends in the consumer space for signs that economic growth and inflation is, or is not, moving in a direction that would warrant current rate cut expectations.

The views expressed herein are presented for informational purposes only and are not intended as a recommendation to invest in any particular asset class or security or as a promise of future performance.  The information, opinions, and views contained herein are current only as of the date hereof and are subject to change at any time without prior notice.