Highlights
Today's personal income report shows a moderating consumer sector with inflation remaining low. Personal income increased 0.4 percent in June, following a 0.4 percent gain also in May. The June boost was below the consensus forecast for a 0.6 percent advance. Within personal income, the wages and salaries component posted a 0.5 percent gain in June, following a 0.5 percent rise the month before. Personal income on a year-on-year slipped to up 6.1 percent from up 6.5 percent in May.

Personal consumption edged up only 0.1 percent, following a 0.6 percent boost in May. The market consensus had projected a 0.2 percent jump in PCEs for June. Spending was led by services with a 0.5 percent increase while nondurables was flat and durables fell 1.6 percent. Personal consumption on a year-on-year edged down to up 5.2 percent from up 5.4 percent in May.

The personal saving rate rose to 0.6 percent in June from 0.4 percent the prior month. The annual revisions to personal income and components raised the personal saving rate somewhat - at least out of negative territory.

On the inflation front, the core PCE price index rose 0.1 percent - the same as in the prior three months. The June core PCE price index came in below the consensus forecast for a 0.2 percent increase. The overall PCE price index eased, rising 0.1 percent in June, following a 0.5 percent jump in May.

Today's report indicates that income is reasonably healthy, but the consumer may be pulling back. As long as the softening is not too much, this is good news for the Fed. Also, the Fed will be happy with the fourth straight 0.1 percent rise in the core PCE price index but will remain concerned about energy costs despite the slowing in the overall PCE price index for June. While the initial second quarter GDP number looked healthy at 3.4 percent, today's personal consumption figures indicate that the economy may be slowing on the margin. Again, the Fed will be happy with some slowing - we will just have to watch other sectors to see if exports and construction outside of housing are adding the right amount to economic growth. Nonetheless, bonds should like today's numbers and equities will also if the focus is on making the Fed happy.