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EconoFACTS: U.S. Personal Income and Consumption (August 2020)

 

Table For Four, Please

Wallets/bank accounts were somewhat lighter in August. Personal incomes took a larger-than-expected hit, down 2.7% (largest since May) as unemployment benefits were cut. However, wages & salaries are, by far, the largest share of incomes and they rose for the fourth straight month, up 1.3% in August alone, matching July's increase. And it had some impact, clearly, but not massive. Spending, overall, was up 1.0%, and in real-terms (this is more important), up 0.7%. There was a downward revision to July, but upward revisions to April, May and June, reflecting yesterday's broader revisions to GDP. Broadly, the pace has slowed but frankly, this is still pretty impressive, all things considering. It also helps the bigger story that unemployment claims continue to slide. Initial claims fell 36k in the final week of September to 837k, the lowest since ... this (wave arms around) ....started in March. Continuing claims (or those who stay on UI) took a 980k dive in the September 19th week to 11,767k, also the lowest since March.

And what were consumers spending on? Cars, dining out/restaurants, recreation services, transportation services, and health care. If consumers were truly worried about finances, going to a restaurant or signing up for memberships for recreational services wouldn't be high up on their "to do" list. Now there was a second consecutive monthly pullback in recreational goods & vehicles but the level remains high.

Bottom Line: Despite slowing momentum, the reduction in UI benefits, U.S. consumers are still in decent financial shape. This suggests that Q3 is going to be stronger than many expected


On a separate note ..... the 2020 Institutional Investor survey is drawing to a close soon. But there is still time! We are always grateful for your support and hope our ongoing commitment to providing best-in-class economic research and analysis earns your vote. Thank you!

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Jennifer Lee Director and Senior Economist



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