A report released by the Commerce Department on Tuesday showed personal income and spending in the U.S. both rose in line with economist estimates in the month of June. The Commerce Department said personal income climbed by 0.4 percent in June, matching the downwardly revised increase in May.
Economists had expected income to rise by 0.4 percent compared to the 0.5 percent growth originally reported for the previous month. Disposable personal income, or personal income less personal current taxes, also increased by 0.4 percent in June after rising by 0.3 percent in May.
The report also said personal spending rose by 0.3 percent in June after climbing by an upwardly revised 0.5 percent in May. Personal spending had been expected to increase by 0.3 percent compared to the 0.4 percent advance originally reported for the previous month.
Real spending, which is adjusted to remove price changes, edged up by 0.2 percent in June after rising by 0.3 percent in May. With income rising by slightly more than spending, personal saving as a percentage of disposable personal income inched up to 8.1 percent in June from 8.0 percent in May.
A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth also ticked up to 1.6 percent from 1.5 percent. Capital Economics' Chief U.S. Economist Paul Ashworth predicted the Fed will push ahead with a 25 basis point interest rate cut on Wednesday despite signs of rising inflation. "Nevertheless, with those upwardly revised income gains translating into much stronger unit labor cost growth over the past 12 months too, we're suddenly left wondering if there is a risk that core inflation will end up surprising on the upside in the second half of this year," Ashworth said.