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Yes, these numbers look to throw a wet blanket on global market psychology. The better than expected earnings season is pretty much fully discounted, and month end/month beginning allocations are behind us.

June was a weak month for government spending that seems to have been reversed in July (from Mike Norman), which accounts for the lower ‘savings rate,’ but those numbers won’t show up for a while.

And the talk by the administration, Congress, and all the critics regarding ‘fiscal responsibility’ and tax increases has functioned to make the point a ‘second stimulus’ is out of the questions without some kind of collapse.

Inflation remains in check with the large output gap keeping a lid on wages and relatively stable crude oil prices keeping costs under control.

Karim writes:

  • Weakness in personal income (-1.3%) a bit more than expected, largely reflecting end of government transfers to households
  • But wage and salary income also still very weak, down 0.4% and down every month this year.
  • Yr/Yr personal income down 3.4% and wage and salary income down 4.7%
  • Drop on personal savings rate from 6.2% to 4.6% largely reflects weakness in income described above
  • Revisions in PCE Deflator reflect same as occurred in GDP data last week: YR/YR Deflator through May now -0.3% vs 0.1% and Core Deflator now 1.6% vs 1.8%.
  • For June, headline deflator rose 0.546% and fell 0.4% Yr/Yr; Core Deflator rose 0.161% and 1.5% Yr/Yr.

Putting aside July auto sales, hard to see meaningful rebound in consumer spending (70% of GDP) with these income numbers; record string of decline in labor income