Real personal spending rose 0.2% in July, a positive indicator for economic growth in the third quarter. However, consumers need to see a higher growth rate in personal incomes for the real economy to grow. Personal income also grew in July, but was only up 4.6% from a year ago, not quite keeping up with the pace of inflation as the Personal Consumption Expenditure (PCE) deflator was up 6.3% from a year ago.

The July savings rate was 5%, unchanged from June. This continues to buffer consumers from ongoing inflation pressures. Checkable deposits for both households and nonprofit organizations are over $4 trillion as of the first quarter of 2022. However, the longer inflation erodes wages and earnings, consumers must tap into savings or credit to support recent buying habits.

For the first time in a while, yearly inflation rates eased for durable goods, nondurable goods, and services though food prices continue to accelerate. For some demographics, the quickening pace of food inflation has been tough on their monthly budgets. 

Monetary policy decisions take time to impact the real economy. Inflation rates are cooling and supply and demand imbalances are improving.  Fed Chairman Jerome Powell and his colleagues continue to highlight the pressure inflation adds to the overall economy.  Recent comments are clearly suggesting that, right now, fighting inflation is more important than supporting growth. As the economic numbers for August start to trickle in over the next several weeks, we’ll see if the Fed’s medicine of raising rates continues to help slow the rising cost of prices.

---

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments. For more information on the risks associated with the strategies and product types discussed please visit https://lplresearch.com/Risks  

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Unless otherwise stated LPL Financial and the third party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

For a list of descriptions of the indexes and economic terms referenced in this publication, please visit our website at lplresearch.com/definitions.

Securities and advisory services offered through LPL Financial, a registered investment advisor and broker-dealer. Member FINRA/SIPC.

Tracking # 1-05317873