Personal income rose 0.3% in August, a hair below market expectations for 0.4% Adjusted for inflation and removing taxes, real disposable income was up a softer 0.1% in the month.

Personal spending also rose 0.3% in nominal terms, on par with the consensus estimate. In real terms, spending rose 0.2%, led by non-durable spending (+0.4%). Both durables and services came in at a solid 0.2%.

The headline PCE price index rose 0.1% in August, while the core measure was flat in the month. Year-over-year, headline inflation edged down to 2.2%, but the core measure held in at 2.0%.

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Key Implications

As consumers go, so goes the economy. Consumer spending is likely to advance by over 3.0% in the third quarter and remain a mainstay of economic growth. Beyond that, spending growth should be expected to slow somewhat as the boost from tax cuts fades.

Core inflation is at the Federal Reserve’s target, but shows few signs of breaking out much above it. We continue to watch for signs of tariff impacts creeping into price growth, but so far evidence is relatively scant, an outcome we attribute to the buoyant U.S. dollar.


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