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Analysts at Wells Fargo, point out that June spending data suggest the consumer is on pretty solid footing, and a pop in the consumer confidence index for July suggests spending should remain elevated.  

Key Quotes:  

“Going into this morning’s personal income and spending report, we already knew real personal consumption expenditures (PCE) grew at a solid 4.3% annualized pace in the second quarter, so a solid read on the consumer didn’t come as a surprise.”

“Real personal spending rose for the fourth consecutive month, up 0.2% in June following back-to-back 0.3% gains in April and May. Consumers have also seen steady income gains in recent months. Personal income rose for the fourth consecutive month, up 0.4%, led by a 0.5% jump in wages and salaries.”

“The Fed’s preferred measure of inflation””the core PCE deflator””rose slightly to 1.6% in June on a year-over-year basis. But, at 1.4%, the headline PCE deflator still remains well-below the Fed’s 2.0% inflation target. Despite this uptick in core inflation and the strong report on the consumer, we still look for the FOMC to cut the fed funds rate 25 bps tomorrow, as below-target inflation and trade and other geopolitical uncertainties cloud the economic outlook.”