No sign from today's PCE report that aggregate consumer spending is slowing down. Slightly the opposite in fact: real consumption has recently accelerated slightly and is now above it's post-GFC trend in all three categories (goods, services and total). Figure 1.
That's despite the fact that real disposable income growth has slowed down as the labour market has loosened. That's true whether you look at the total, or the rise in real disposable income after subtracting shelter, food and energy purchases. (Discretionary Disposable Income). Over the past 6 months, discretionary income has grown by 1.3% per annum in real terms while discretionary spending has grown by 4.5% per annum. Figures 2 and 3.
That's not unprecedented: especially over the COVID period: US consumers have been pretty good at smoothing their spending plans. Moreover, the 'underlying' growth rate of real disposable income growth currently nearer 2.5% per annum and unless employment growth and wage inflation tank, (unlikely in our view) or energy prices soar we would not expect discretionary spending to collapse either.
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