Personal consumer expenditure (PCE) in the United States rose 0.5% in August following July's 0.4% increase. August's gain reflected a sharp 1.7% rise in spending on nondurables accompanied by a 0.3% increase in spending on durables and 0.2% rise in spending on services.
The rise in spending on non-durables was in part a reflection of a jump in gasoline prices. After accounting for prices, the volume of spending on non-durables increased by a more modest 0.3%. The durables component conversely posted a faster increase in volumes terms with a gain of 0.5% compared to the 0.3% nominal increase. The volume of spending on services fell 0.1%.
Personal income increased at a disappointing 0.1% rate accompanied with a downgrade to July's increase to 0.1% from 0.3%. With spending outpacing income growth in August, the savings rate slipped to 3.7% from 4.1% although still managed to remain above the recent low of 3.2% recorded in November of last year. In 2005 dollars, personal income fell by 0.3% in August, marking the first decline since November 2011.
The PCE deflator rose 0.4% with the core deflator posting a milder 0.1% increase. Compared to a year earlier, the PCE deflator increased 1.5% with the core measure up 1.6%.
The mild rise in the volume of consumer expenditure built on July's gain resulting in spending running at an annualized 1.4% pace relative to the second-quarter average. This was in line with the 1.5% annualized increase recorded from April to June. The improvement in the U.S. Conference Board's measure of consumer confidence in September suggests that spending continued to rise as the third quarter drew to close although heightened uncertainty about the government being able to avoid the fiscal cliff likely limited the monthly gain.
EXperts from RBC Economics note that the Federal Reserve's ambitious plan to stimulate growth and fuel a material decline in the unemployment is giving U.S. consumers some measure of comfort, however, "until there is a clarity about how the fiscal outlook will play out, the U.S. consumer is unlikely to be the engine of a sharp acceleration in pace of economic activity."
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