According to analysts from Wells Fargo, the softer tone in consumer spending will likely cause many forecasters to scale back their expectations for Q2 economic growth.
Key Quotes:
“This past week’s economic data have led many forecasters to ramp up their expectations for second quarter growth from already lofty expectations. May’s personal income and spending data should temper some of that enthusiasm. Overall, personal income rose largely in line with expectations, climbing 0.4 percent. Wages and salaries rose 0.3 percent, with a 0.4 percent drop in manufacturing earnings holding back the topline gain.”
“While wages and salaries were soft, overall income growth came in exactly in line with consensus expectations. Wage growth outside of manufacturing was fairly robust in May, with the trade, transportation and utilities sector posting a 0.7 percent increase.”
“The softer consumer spending will likely cause many forecasters to scale back their expectations for second quarter economic growth. Real personal consumption outlays were flat in May and, through the first two months of the second quarter, are up at just a 2.3 percent annual rate from Q1.”
“The PCE inflation data rose in line with expectations. The overall PCE deflator rose 0.2 percent and is now up 2.3 percent year to year. Higher energy prices are behind much of that gain. The core PCE deflator also rose 0.2 percent and is up 2.0 percent year to year.”
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