The Commerce Department unleashed a torrent of economic data on Wednesday, and there's nothing to do but dive right in.
The July Personal Consumption Expenditures (PCE) report USPCE=ECI is a good place to start.
The PCE price index—the Fed's preferred inflation yardstick—inched 0.2% higher last month, and by 3.7% year-on-year, both numbers landing 0.1 percentage point north of expectations.
Core prices (which exclude food and energy items) increased on monthly and annual bases by 0.2%, and 3.3%, respectively, hitting the consensus bull's eye.
Elsewhere in the report, personal income increased by 0.4%, double June's 0.2% rate, which analysts expected to be repeated last month.
Personal consumption grew by 0.2%, marking a slight monthly deceleration but printing above the 0.1% growth projected by economists.
With income growth outpacing outlays, the savings rate—the unspent portion of disposable income—jumped to 3.0% from 2.6%, the lowest level in over four years.
"The economy remains strong and inflation isn’t dropping," writes David Russell, global head of market strategy at TradeStation. "Strong consumption, spending and durable goods orders suggest the committee has room to tighten without causing a recession."
"These numbers support hawkish policymakers at the Fed’s committee and increase pressure on Kevin Warsh later this week," Russell adds. "It’s getting harder for him to dodge the issue of hiking rates."
The Commerce Department's initial stab at second-quarter GDP USGDPA=ECI reiterated last month's initial take, which showed the U.S. economy grew by 1.5% at a quarterly annualized rate in the April-to-June period, just as analysts predicted.
Below the surface, the report shows international trade, with imports far outpacing exports, detracted 1.1 percentage points from the topline. Private inventories and government spending subtracted a combined 0.9 pps from the headline figure.
Consumer spending, which accounts for about 70% of the U.S. economy, did the heavy lifting as always. The growth rate was upwardly revised to 3.4% from 3.2%. The consumer contributed a robust 2.3 percentage points to the topline number. Without the consumer, Q2 GDP would have fallen 0.8%.
"A one-two punch of inventory depletion and a widening trade gap weighed significantly on headline growth," says Jim Baird, chief investment officer at Plante Moran Financial Advisors.
"Consumers might not be happy about high prices, but that frustration didn’t crush their ability to spend," Baird adds. "Consumers opened their wallets a bit more freely on goods and services alike."
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