The U.S. June personal income report was as expected and the data are already incorporated into the second quarter gross domestic product estimate, so there is little to conclude other than that hurdles to growth remain.

June personal income printed down 1.3% in its largest drop since January 2005 and personal consumption expenditures were up 0.4%. PCE core prices posted plus-0.2% for a 1.5% increase over the year.

June income dropped because transfers fell $131.7 billion after posting a $166.1 billion rise in May, both reflecting one-time stimulus checks, which went out in May and then ceased.

Private wages declined $28.6 billion after an $11.3 billion slide in May as services pay dropped, illustrating that the consumer remains troubled and the labor market remains weak.

Proprietors’ income and income on assets also declined during the month.

Benchmark revisions raised rents and interest, thus also boosting outlays and savings in 2006-08. Dividends were lowered.

The Commerce Department said the comprehensive revisions run back to 1929, but the most notable were from 1997 forward. Revisions for early periods tend to be small.

The June savings rate remained elevated at 4.6% after a 15-year record high of 6.2% in May.

It still appears that consumer response to bad times and the stock market drop was to save more. Savings have been elevated since spring 2008 and show no signs of dropping back.

Real PCE has printed down 0.2% in April, flat in May, and off 0.1% in June. Moreover, June saw declines across categories.

This does not suggest a natural surge ahead, though the cash-for-clunkers auto program apparently will offer a big boost to durables spending in July.

The bottom line is this was not a strong report, with its lower core income reading and implications that more income will be saved rather than spent.

— Market News International

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