US: Expect healthy growth in personal income and subdued growth in spending - Nomura

In view of analysts at Nomura, robust job creation and steady gains in earnings suggest healthy growth in US personal income.

Key Quotes

“The BLS June employment report indicates a steady increase in aggregate earnings of production and nonsupervisory staff. Based on these data, we forecast a 0.4% m-o-m increase in personal income (Consensus: 0.4%).”

“Incoming data suggest subdued growth in personal spending in June. Our forecast is a 0.2% m-o-m increase (Consensus: 0.1%), a slight improvement from the 0.1% in May. Retail sales in June were soft with a 0.1% m-o-m decline in core (“control”) retail sales. Sales of many nondurable goods were weak, suggesting that personal spending on nondurables was likely weak in June. In particular, sales at food and beverage stores and health and personal care stores declined moderately. The pace of consumer lightvehicle sales has remained subdued in recent months. Personal spending on autos, thus, was likely soft in June. We expect a steady increase in spending on services considering steady activity in the service sector. Sales at dining and drinking places declined, but utilities output increased modestly in the month, suggesting more spending on utility services.”