Government Action, Employer Compensation Spur Personal Spending In June

Personal income increased in June for the first time since March, according to a new Bureau of Labor Statistics report.

Specifically, income rose by $26.1 billion (or 0.1%) and personal consumption expenditures increased $155.4 billion (or 1%).

Why It Matters: The rise in personal income surprised many economists.

“U.S. personal income and spending came in higher than consensus expectations,” tweeted economist Mohamed El-Erian.

Much of the bolstering of personal incomes came from government deficit spending, particularly the American Rescue Plan, according to the Twitter account of Modern Monetary Theory economist Warren Mosler.

What Else: The rise in personal income also stemmed from increased employer compensation, according to the Bureau’s report.

Much of consumer spending came in the form of services ($126.1 billion) rather than goods ($29.3 billion), as people spent on the former by more than four times the latter.

Consumers mostly paid for nondurable goods like pharmaceuticals and gas. The latter continued to precipitously rise, as the Personal Consumption Expenditures Price Index tracked a growth in energy prices of 24.2% during the month of June.