US: Expect a solid 0.5% m-o-m increase in personal income and spending - Nomura

Analysts at Nomura expect a solid 0.5% m-o-m increase in personal income in July after a flat reading in June.

Key Quotes

“The unexpected weakness in June was concentrated on income receipts from assets, which include personal dividend and interest income. Personal dividend income fell 3.0% m-o-m in June, which appears to be a negative payback from a strong 4.8% increase in May. As we expect this movement to be transitory, we expect personal income to continue to grow modestly.”

“Moreover, we forecast a steady 0.5% m-o-m increase in personal spending in July. Incoming retail sales point to a healthy increase in durable goods spending. Sales of major durable goods increased at a healthy pace. In particular, sales at autos and auto parts dealers, which increased strongly by 1.2%, suggest consumer demand for autos remains healthy. Note that some of the slowdown in total light vehicle sales can be attributed to major automakers’ recent decisions to reduce their dependence on sales of daily rental segment.”

“Sales of other consumer discretionary goods such as leisure equipment and household durable goods increased steadily although sales of electronics faltered. For service spending, we expect a trend-like increase. Spending on utility services likely increased. Utility output rose 1.6% in July, likely driven by a seasonal increase in cooling demand. Further, sales at dining and drinking places also increased steadily, suggesting continued increase in spending on dining services. Looking ahead, with strong job gains and gradual wage growth, we continue to expect steady growth in personal consumption in Q3.”