Yesterday, Darius joined Anthony Pompliano to discuss Consumer Spending, Personal Income, Inflation, and more.

In case you missed it, here are the three most important takeaways from the interview: 

1. Consumer Spending Has Accelerated In Recent Months

Consumer spending, the total value of all goods and services purchased by households, makes up 68% of GDP.

Last week’s PCE report indicated that Real Personal Consumption Expenditures accelerated to 2.9% in June, primarily driven by a rebound in goods consumption – a three-month high.

In addition, Real Goods PCE accelerated to 5.4% on a three-month annualized basis, also a three-month high.

Both readings suggest US consumers remain incredibly resilient.  

2) Accelerating Income Growth Supports Our “Resilient US Economy” Theme

Even if individual real wages are declining, as we have seen recently, overall consumer income can still grow from increased employment, government support, and other income sources.

Nominal Employee Compensation, the broadest nominal measure of income published about the labor market every month, accelerated to 6.2% three-month annualized in June – the highest reading since September last year.

Additionally, Personal Interest Income, the income individuals receive from interest-bearing assets like savings accounts and bonds, accelerated to 8.8% three-month annualized basis in June. 

This figure is the highest number we have seen since January of this year and signals that consumers may have more disposable income to spend. 

3) The Inflation Fight Is Improving Significantly

Typically, inflation breaks down AFTER a recession. This year, we have seen the opposite – a term referred to as “immaculate disinflation”.

In Friday’s PCE report:

  • Core PCE, the Fed’s preferred measure of inflation, decelerated to 3.3% on a three-month annualized basis, the lowest print since February 2021.
  • Super Core PCE  decelerated to 3.2% on a three-month annualized basis, the lowest print since July 2022.
  • Median PCE decelerated to 3.8% on a three-month annualized basis, the lowest print since August 2021.
  • Trim Mean PCE decelerated to 3.4% on a three-month annualized basis,  the lowest print since August 2021.

We expect the YoY inflation numbers to follow the low three-month annualized rates over the coming months, strengthening the immaculate disinflation narrative supporting asset markets.

That’s a wrap! 

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