Despite Uncertainty, US Personal Income and Spending Increase in July
U.S. consumers saw an increase in personal income and spending in July of 1.1% and 0.3%, respectively, the Commerce Department said today. This comes in spite of looming economic uncertainty coupled with pandemic-related reluctance.
“The estimate for July personal income and outlays reflected the continued economic recovery reopening of establishments, and government response related to the COVID-19 pandemic,” according to the release.
The increase in July is primarily due to increases in government social benefits, such as the new advance Child Tax Credit payments authorized by the American Rescue Plan, as well as the compensation of employees. The increase in compensation was primarily in private wages and salaries.
Americans opted to spend more on services over goods in July. An increase of $102.6 billion in service-related spending was widespread across all categories, with food services and accommodations leading the charge. Within goods, a decrease of $60.4 billion was widespread across most spending categories, led by motor vehicles and parts, recreational goods and vehicles, as well as clothing and footwear. These decreases were partially offset by an increase in gasoline and other energy goods.
According to the release, personal saving was $1.72 trillion in July and the personal saving rate — calculated as a percentage of disposable personal income — was 9.6%.
“The strength in spending will remain the focal point of the coming months as the rise in cases and hospitalizations continue to threaten the most vulnerable sector of the economy,” writes TD economist Maria Solovieva, CFA. “The spread of the Delta variant could still damage the economy: consumers may grow reluctant to spend on still-depressed high-touch services, while workers on the sidelines may feel less compelled to seek employment.”
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Last updated: August 27, 2021