I am on the road today, so I will have to keep this brief.

In June nominal personal income rose 0.3%, and spending rose 0.2%. Since PCE inflation rose less than 0.1%, real income rose 0.2% and real spending rose 0.1%.

Since spending on services tends to rise even during recessions, the more important component to focus on is real spending on goods. This rose 0.2% to its highest level ever except for last December:

As indicated above, PCE inflation was also subdued. The core measure rose 0.2%. On a YoY basis, PCE inflation is 2.5%, and core PCE inflation is 2.6%:

Both of these are at their lowest levels since the pandemic.

Finally, with the usual one month delay, real manufacturing and trade sales rose sharply, by 0.9%, also to their highest level ever except for last December:

The two big takeaways from this month’s report are that the consumer remains strong, and inflation, no matter how you measure it, is close to the Fed’s 2% target. Again, if that is indeed a target rather than a ceiling, the Fed has no reason not to proceed with at least several small interest rate cuts.

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