The U.S. Commerce Department announced today that personal income expanded by 0.1 percent in July (www.bea.gov/bea/newsrel/pinewsrelease.htm). This was lower than expected -- see, for example, the roundup at Briefing.com: www.briefing.com/Silver/Calendars/EconomicCalendar.htm.
Not surprisingly this is assumed to be less than good news. From Bloomberg (quote.bloomberg.com/apps/news?pid=10000103&sid=aurH23zSCkdc&refer=news_index):
The report supports the Federal Reserve's view that a slowdown in demand and a pickup in inflation because of higher oil prices would prove transitory. More hiring after four months of slowing job growth may be needed to sustain spending as benefits from tax cuts and mortgage refinancing recede, economists said.
Over at CNN (money.cnn.com/2004/08/30/news/economy/income_spending/index.htm):
"Trends show a sharp surge on auto spending in July but little strength elsewhere," said Robert Brusca of FAO Economics in a note to clients Monday. "Most disturbing is the ongoing sluggishness for services. Demand there is hovering around (annual) gains of 2 percent. That won't create many jobs."
Consumers, however, don't seem so depressed. Consumer spending rose by 0.8%, the fastest monthly expansion so far this year.
Simple pop quiz: If income growth slow, but consumption growth rises, what does that suggest about consumer expectations of future income?
One other piece of news in the release -- consumer prices (as measured by the Index for Personal Concsumption Expenditures (www.investopedia.com/terms/p/pce.asp) -- did not increase in July. That really warms a Fed economist's heart (at least until we start worrying about deflation again).