Personal Income Up and Spending Flat

Personal income rose 0.5 percent in August, while spending was flat on the month. In real terms, disposable personal income fell almost one percent, while expenditures were flat. The consumer remains under pressure in the second half of the year and we expect that real consumption will decline outright in the second half.

Income Rose

• Personal income rose 0.5 percent in August, but after taxes income fell 0.9 percent on both a nominal and real basis. With the labor market remaining very weak, slow to negative growth in disposable income will most likely plague the consumer for at least the next six months. Weaker income will continue to pressure consumer spending.

Spending to Remain Weak

• Real consumer spending was flat in August but has declined 1.5 percent over the last three months, at an annual rate. This marks the sharpest decline in spending in 17 years.
• Even the normally-stable consumption of services line has taken a pretty sharp hit in recent months. Spending is now at a pace below what it was during the last recession.

Wachovia Corporation
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