Positive Personal Income and Inflation Data for July

By SBE Council at 30 August, 2024, 4:20 pm

by Raymond J. Keating -

The latest personal income report from the U.S. Bureau of Economic Analysis confirmed tame inflation for the past three months.

The PCE (personal consumption expenditures) Index showed inflation running at 0.2 percent in July. That came on the heels of 0.1 percent in June and 0.0 percent in May. That tracks with the latest Consumer Price Index inflation measures.

Meanwhile, personal income grew by 0.3 percent in July. However, that's in nominal dollars, which means that real personal income grew at roughly 0.1 percent, which was the growth for real disposable personal income as well. Disposable income is personal income less personal current taxes, and is important as it roughly captures the income individuals have available for consuming, saving and investing.

Lastly, this latest report showed that consumer spending grew strongly in real terms. Indeed, that has been the case for the past three months, with real personal consumption expenditures growing at 0.5 percent in May, 0.3 percent in June and 0.4 percent in July.

The consumer is, at the same time, obviously important to businesses and the economy, but also a follower of business. That is, consumers follow the leads of business. As we look ahead on the economy, it must be kept in mind that if business is investing, growing and hiring, then consumers are happy to spend. But when business investment gets reined in, the consumer reacts accordingly.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economistand The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.