Real Personal Consumption Falls in July With Government Stimulus Fading

The government stimulus program provided a short jolt to the economy but it's not fading. Get ready for much slower growth.

The government's personal consumption expenditure numbers are out today and they show, as expected, that real personal consumption is down.  From the Bureau of Economic Analysis:

"Real PCE -- PCE adjusted to remove price changes -- decreased 0.4 percent in July, compared
with a decrease of 0.1 percent in June. Purchases of durable goods decreased 1.6 percent, compared
with a decrease of 1.4 percent. Purchases of motor vehicles and parts accounted for most of the
decrease in July and about one-half the decrease in June.
Purchases of nondurable goods decreased
0.9 percent in July, compared with a decrease of 0.3 percent in June. Purchases of services increased"
less than 0.1 percent, compared with an increase of 0.2 percent.

The automakers are getting slammed by a slowing economy, faltering consumer demand, and high gas prices. 

This slowing growth has been widely expected and continues to play one part of the inflation/growth battle that will determine interest rates going forward.  For the moment, the betting is that slowing growth will moderate inflation and that rates will stay at 2%.

Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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