Increase in personal income and expenses in June 2024

Personal income rose $50.4 billion (0.2% month-on-month) in June, according to estimates released today by the U.S. Bureau of Economic Analysis. Personal disposable income (DPI), personal income minus current personal taxes, increased by $37.7 billion (0.2%) and personal consumption expenditure (PCE) increased by $57.6 billion (0.3%).

The PCE price index increased by 0.1%. Excluding food and energy, the PCE price index increased by 0.2% Real PCI increased by 0.1% in June and real personal spending increased by 0.2%; goods increased by 0.2% and services increased by 0.2%

The increase in current dollar personal income in June primarily reflected increases in compensation and receipts of current personal transfers

The $57.6 billion increase in current consumer personal spending in June reflects a $53.1 billion increase in services spending and a $4.5 billion increase in goods spending. In services, other services (led by international travel) and housing and utilities (led by housing) were the largest contributors to the increase. In goods, other non-durable goods (led by medicines and other medical products), recreational goods and vehicles (led by information processing equipment) were the largest contributors to the increase. These increases were partially offset by decreases in motor vehicles, spare parts (driven by new motor vehicles), gasoline and other energy commodities. Detailed information on monthly personal consumption spending can be found.

Personal expenses — the sum of personal consumer spending, personal interest payments, and ongoing personal transfer payments — increased by $59.3 billion in June. Personal savings stood at $703.0 billion in June and the personal saving rate — personal saving as a percentage of personal disposable income — was 3.4 percent Pricing

The effect of increasing personal income on spending

“Personal Income m/m” is a term used in economic analysis to refer to the change in personal income during a month compared to the previous month. When Personal Income m/m is measured, the focus is on the amount of income that individuals receive during a given month.

If Personal Income m/m is positive, it means an increase in personal income during the selected month compared to the previous month. Conversely, if Personal Income m/m is negative, it means a decrease in personal income during the selected month compared to the previous month .

Higher levels of personal income typically lead to increased consumer spending. In this scenario, consumers may feel more financially secure and have more discretionary income to spend on retail goods such as clothing, electronics, and household goods.

Tracking Personal Income indicators and their changes is important in analyzing the economy, as an increase in personal income can usually reflect an improvement in the economy and an increase in spending, which positively affects economic growth. .

Investors may rotate their investments towards retail equities during periods of strong personal income growth, expecting higher profits for these companies. This can increase demand for retail shares and possibly raise their prices.

The impact on e-commerce Higher personal income levels can also benefit e-commerce retailers, as consumers may increase their online shopping activities. E-commerce businesses offering convenience, competitive pricing, and a wide range of products may experience significant growth during this period..

In short, strong personal income growth can have a positive impact on the retail sector by boosting consumer spending, increasing retail sales, improving the equity performance of retail companies, and driving the sector’s turnover towards retail equities..

 The impact of interest rates on stocks during low personal income

During periods of low personal income, interest rates can still have a significant impact on stock prices. Here’s how interest rates affect stock prices when personal income falls:

Investor sentiment: Lower personal income usually indicates economic weakness, which can lead to lower consumer spending and lower corporate profits. In such a scenario, investors may become more risk-cautious and cautious about the overall economic outlook, which could put downward pressure on stock prices.

Central Bank Policies: During periods of economic weakness, central banks may respond by cutting interest rates to stimulate borrowing and spending. Low interest rates can make borrowing cheaper for businesses, which could boost their profitability and support stock prices.

Stock valuation: Low interest rates can make stocks more attractive compared to other investments such as bonds. When interest rates are low, a discounted cash flow valuation of stocks tends to be more favorable, which may support stock prices.

Sector volatility: Different sectors of the stock market may respond differently to interest rate changes during periods of low personal income. Interest-sensitive sectors such as real estate and utilities may benefit from lower interest rates, while sectors such as the financial sector may face challenges due to narrower interest rate differentials.

Economic stimulus: In response to low personal income and economic weakness, governments may implement stimulus measures to support the economy. Stimulus packages can boost investor confidence and provide a short-term boost to stock prices, even in the face of declining personal income.

Future outlook: Stock prices are also affected by future expectations of corporate earnings growth. Lower interest rates can indicate easier borrowing conditions and potential higher future profits for companies, which can support stock prices despite lower personal income.

In short, while lower personal income can mitigate consumer spending and corporate profits, the impact of interest rates on stock prices during such periods can be mixed. Lower interest rates can provide support to stock prices by making stocks more attractive investments, stimulating borrowing, and improving stock valuation. However, the overall economic context and market sentiment play crucial roles in determining how stocks respond to interest rate changes during periods of low personal income.

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