Cramer's look at the Consumer Spending info that dropped...
Friday morning, shortly before the opening bell, the Bureau of Economic Analysis (BEA) released personal income and spending numbers for August.
Personal income increased 0.2% (or $35.5 billion), matching expectations following a 1.1% increase in July.
Disposable personal income -- the income available for spending or saving after taxes -- increased 0.1% (or $18.9 billion) in August, following a 1.1 increase in July.
Personal consumption expenditures (PCE) -- i.e., personal spending, which accounts for over two-thirds of U.S. economic activity -- advanced 0.8% (or $130.5 billion) in August, exceeding expectations for a 0.6% advance, following a 0.1% decrease in July. When adjusted for inflation, real PCE increased 0.4% monthly, matching expectations following a 0.5% decrease in July.
On the release, the Bureau stated: " The estimate for August personal income and outlays reflected the continued economic recovery, reopening of establishments, and government response related to the COVID-19 pandemic. Government social benefits increased in August, reflecting advance Child Tax Credit payments authorized by the American Rescue Plan. The full economic effects of the COVID-19 pandemic cannot be quantified in the personal income and outlays estimate because the impacts are generally embedded in source data and cannot be separately identified."
The increase in personal income in August can be primarily attributed to a $53.0 billion increase in compensation of employees and a $21.7 billion increase in government social benefits to persons.
The $130.5 billion rise in personal consumption expenditures in August can be attributed to a $64.6 billion increase in spending on services and a $66.0 billion decrease in spending on goods. On the goods front, there was a $761 billion decrease in spending on durable goods and a $73.6 billion increase in spending on nondurable goods.
Notably, the PCE price index advanced 0.4% in August, outpacing expectations for a 0.3% advance following a 0.4% increase in July. The Core PCE price index (which takes out food and energy to reduce month-to-month volatility) advanced 0.3% in August, also outpacing expectations for a 0.2% advance following a 0.3% gain in July. More importantly, on a year-over-year basis, the core index was up 3.6% in August, outpacing expectations for a 3.5% advance following a 3.6% increase in the 12-month period ending in July.
We point out the annual core PCE price index as a key economic metric because it represents the Fed's preferred measure of inflation. Recall that controlling the rate of inflation is one of the Fed's dual mandates when determining the outlook for rates, the other being maximizing employment. As a reminder, the Fed ideally targets a 2.0% rate of inflation on average over time.
