Personal Income & Spending
Welcome to The Observatory. The Observatory is how we at Prometheus monitor the evolution of the economy and financial markets in real-time. The insights provided here are slivers of our research process that are integrated algorithmically into our systems to create rules-based portfolios.
Our primary takeaways are as follows:
Nominal incomes increased as wages and asset income accelerated. This led to a sequential increase in real spending.
Additionally, broad-based conditions remain resilient and consumer expenditure inflation levels have also shown signs of moderation towards the target level. This remains a support for nominal growth conditions.
However, household savings rates have sequentially deteriorated and interest expense growth continues to outpace income growth, signaling potential weakness in future spending. Nonetheless, we remain far from the territory of an imminent recession.
In July, nominal personal income increased by 0.31% contributing to a sequential acceleration in the quarterly trend. This increased income resulted in a corresponding rise in nominal consumption spending of 0.53%. Below, we show the sequential evolution of personal income:
Income flows through consumption, taxes, savings, interest payments, and transfers. For a better understanding of the impacts of income growth, we show the composition of the uses of income. As we can see below, the primary use of income was increased consumption:
We now zoom out to understand what has driven these income changes over the last year, relative to its major drivers over time. Below, we show the composition of changes in real incomes, broken down into its major sources. Over the last year, real incomes were primarily driven by Wages which contributed to a 1.14% rise in total real income growth of 1.92%:
