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Image from the BEA, annotations by Mish

The BEA’s Personal Income and Outlays report for June 2024 shows significant negative revisions in income for April and May but a boost in spending in May.

For June, economists missed the mark badly. The Bloomberg Econoday nominal personal income consensus estimate for June (current dollars) was 0.4 percent but the BEA reports 0.2 percent.

This rates to fuel the discrepancy between Gross Domestic Product (GDP) and Gross Domestic Income (GDI).

Personal Income and PCE

• Personal income increased $50.4 billion (0.2 percent at a monthly rate) in June.
• Disposable personal income (DPI), personal income less personal current taxes, increased $37.7 billion (0.2 percent)
• Personal consumption expenditures (PCE) increased $57.6 billion (0.3 percent).
• Real (inflation-adjusted) DPI increased 0.1 percent in June
• Peal PCE increased 0.2 percent; goods increased 0.2 percent and services increased 0.2 percent.

Spending rose more than income in May and June.

PCE Price Index Month-Over-Month

• The PCE price index, the Fed’s preferred measure of inflation, increased 0.1 percent.
• Prices for goods decreased 0.2 percent and prices for services increased 0.2 percent.
• Excluding food and energy, the PCE price index increased 0.2 percent
• Food prices increased 0.1 percent and energy prices decreased 2.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

PCE Price Index Year-Over-Year

• From the same month one year ago, the PCE price index for June increased 2.5 percent.
• Prices for goods decreased 0.2 percent and prices for services increased 3.9 percent.
• Food prices increased 1.4 percent and energy prices increased 2.0 percent.
• Excluding food and energy, the PCE price index increased 2.6 percent from one year ago.

Five Measures of Inflation Percent Change Year-Over-Year

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Data from the BLS and BEA, chart by Mish

The market is up today (so far at least) for the 223rd time (I made that number up but it may be close), on news of expected rate cuts with moderating inflation.

However, please note zero year-over-year progress on the CPI for a full year. Year-over-year improvement on PCE has slowed to a trickle.

And the Fed will not exactly be pleased with the composition of the month-over-month contribution to the PCE price index.

Prices for goods decreased 0.2 percent and prices for services increased 0.2 percent.

Services inflation has been sticky and services are more important than goods.

Regardless of little additional progress on inflation, rate cut odds have been increasing rapidly because the economy is slipping rapidly, even jobs.

The GDP-GDI Discrepancy

Instead of minding GDP, mind the GDP-GDI gap and the Jobs vs Employment gap.

GDI (not out yet for Q2) is much more likely to be accurate.https://t.co/g4yWEaf3Js pic.twitter.com/tzRO37Es2R

— Mike "Mish" Shedlock (@MishGEA) July 25, 2024

Real GDP and GDI in Billions of Dollars 2024 Q2 Advance Estimate

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And today we see negative revisions to income!

Expect a Rate Cut in September as All Hell Breaks Loose

For discussion of the weakening economy please see “All Hell Breaks Loose” In the Next Few Months as Recession Bites

Nearly everyone has their eyes on this relatively benign inflation data, but the real news in this report is the significant negative revisions to income.

This implies the job reports are not what they seem. Later today I will discuss huge pending negative revisions for jobs, so stay tuned in.

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