As we inch closer to the Federal Reserve’s next big decision, recent data on personal consumption and income gives us an updated snapshot of the U.S. economic engine. And like much of 2024, the picture is mixed—showing resilience in some areas and caution in others.
Let’s break it down.
📊 Comparative Summary (vs. Historical Averages):
| Metric | Current Monthly | Avg Monthly | Current Annual | Avg Annual | Trend |
|---|---|---|---|---|---|
| Durable Goods Spending | 0.97% | 0.40% | 4.45% | 4.70% | 🔼 Short-term spike, still below avg annually |
| Core PCE Inflation | 0.37% | 0.26% | 2.79% | 3.24% | 🔽 Easing inflation, but sticky |
| Total Real Consumption | 0.10% | 0.18% | 2.68% | 2.16% | ➖ Near normal annually, soft monthly |
| Real Disposable Personal Income | 0.54% | 0.27% | 1.80% | 3.16% | 🔼 Improving monthly, weaker annually |
🔧 Durable Goods Spending Bounces Back
In a surprising turn, real personal consumption expenditures on durable goods jumped 0.97% in the latest month, well above the historical average of 0.40%. While this could suggest renewed consumer confidence—think more cars, electronics, and home appliances—it’s worth noting that the three-month moving average is still negative at -0.59%, reflecting previous slowdowns.
Annual growth in durable goods spending stands at 4.45%, slightly below the longer-run average of 4.70%. So, while there's a short-term rebound, the longer trend is still playing catch-up.
📉 Core Inflation Is Cooling… Slowly
The Personal Consumption Expenditures (PCE) price index excluding food and energy, the Fed’s preferred inflation gauge, rose 0.37% in the last month, above its historical monthly average of 0.26%. However, on an annual basis, core PCE sits at 2.79%, which is down from the historical average of 3.24%.
This tells us inflation is heading in the right direction—but still has a way to go to hit the Fed’s 2% target. The three-month moving average of 0.29% suggests a slow, steady cooling trend.
🛍️ Overall Consumption Is Sluggish
When we look at total real personal consumption, the story shifts. The monthly gain was just 0.10%, with a three-month average of nearly flat at 0.01%. Even though the annual rate stands at 2.68%, close to the historical average of 2.16%, this still signals a cautious consumer—especially compared to the durable goods bump.
💵 Income Gains: Good but Not Great
There’s encouraging news on the income side. Real disposable personal income grew 0.54% last month, almost double its historical monthly average. The three-month average also looks solid at 0.31%.
But zooming out, annual income growth is just 1.80%, well below the average of 3.16%. That gap matters—because it tells us that while paychecks are starting to grow again, they’re still not keeping pace with past trends. That may explain the muted growth in overall consumption.
⚖️ What It All Means
The data seems to confirm that the U.S. economy is still on a soft landing path:
- Inflation is cooling gradually but remains above target.
- Consumers are spending on big-ticket items again—but overall spending is subdued.
- Income is improving, but still lagging behind historical norms.
There’s no flashing red light—but there’s no green light either. It's more like a yellow light, signaling caution, moderation, and continued economic balancing.
💡 Final Thought
The American consumer is still standing—but walking carefully. If income growth continues to pick up and inflation continues to cool, the second half of the year could bring more confidence and momentum. Until then, it’s a waiting game for the Fed, markets, and consumers alike.
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