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Mid-Week Update - September 1, 2010

American households had a bit more money in their wallets in July.  The Bureau of Economic Analysis reported that personal income increased 0.2 percent during the month following a slight (less than 0.1 percent) decline in June.  Wage incomes also reversed course in July, as a 0.3 percent gain followed the 0.1 percent decline from June.  Year-to-year, the pace of income growth has remained slow—personal income has grown 3.0 percent since July 2009 while wages were up 1.7 percent. 

Consumer spending brightened slightly during the month, as personal consumption expenditures increased 0.4 percent following a flat month in June.  Durable goods spending grew 0.9 percent while that of non-durable goods grew 0.3 percent.  As consumer spending grew more quickly than incomes, the savings rate slowed to 5.9 percent (compared to 6.2 percent in June).  The relative tepid pace of spending—consumption has increased 3.4 percent over the past 12 months—has kept inflation in check.  The personal consumption deflator (PCE) deflator increased 0.2 percent in July and has grown 1.5 percent since July 2009.  The core PCE deflator grew 0.1 percent in July and has increased 1.4 percent over the past 12 months.

The Federal Reserve Bank of Dallas' Texas Manufacturing Outlook Survey improved 7.5 points to a reading of -13.5.  This was the third consecutive month in which the index was below the critical expansionary threshold of 0.0. The production index fell 5.0 point to 4.9 as nearly equal percentages of survey respondents (26 percent) reported increased and decreased activity.  Other critical components declined during the month; including, new orders, capacity utilization and shipments.

Later today, watch for the August Institute for Supply Management's Report on Business for the manufacturing sector, August vehicle sales and July data on construction spending.  Thursday brings July reports on factory orders and pending home sales along with an update of the second quarter productivity data.  The week ends on Friday with the much awaited August employment report and the ISM's Report on Business for the non-manufacturing sector.  Read about this week's data releases in next Monday's issue of AFP EconWatch.