Inflation, income, spending and savings rate data rundown

Headline and core PCE in June were spot on with expectations with one tenth headline and two tenths core m/o/m gains. The y/o/y change was 2.5% and 2.6% for each respectively. As these figures come after CPI, PPI and yesterday's Q2 GDP report which incorporated these numbers, it was hard to deviate much from the estimates. I'll argue again, PCE's heaviest weighting is healthcare and mostly which is determined by Medicare and Medicaid reimbursement rates unlike CPI. Why no one has asked why Powell thinks this is a better gauge of inflation than CPI is beyond me, and where CPI runs usually about 100 bps higher than PCE because of this. 

Anyway, June spending rose as expected by .3% m/o/m but May was revised up by 2 tenths so we could get a slight tweak up in the Q2 GDP revision whenever it comes, all else equal. Income though was light relative to the estimates. Combining the two puts the savings rate at 3.4% from 3.5% in May and that is the lowest since November 2022. 

With respect to the consumer, that savings rate drop points to little cushion and helps to explain why so many are price conscious and budget seeking, as we've heard countless times. On the other hand, those that have savings are certainly enjoying getting paid well on it via higher interest rates. Ironically, many who have that savings don't want the Fed to be cutting short term rates.