Stronger Q2 Data and Falling Jobless Claims May Offset Consumer Confidence Decline

The latest revision to second-quarter GDP data is the third and final one.

According to the newest data from the Bureau of Economic Analysis, real disposable income turned out to be healthier than initially reported.

On Thursday (Sept. 26), the bureau said in a news release that the U.S. economy grew at an annualized 3% pace in the second quarter, outpacing the consensus estimate of 2.9%, though it’s the same “headline” growth rate that had been seen in the second revision. The second quarter outstripped the 1.6% “final” growth rate of the first quarter (upwardly revised from 1.4%), as measured on an annualized basis.

In reference to prices, the growth in personal consumption expenditures pricing was the same as had been estimated previously, at 2.5%.

Disposable Income Revisions

But the data also showed that disposable personal income increased $260.4 billion, or 5%, in the second quarter, an upward revision of $77.3 billion from the previous estimate.

“Real disposable personal income increased 2.4 percent, an upward revision of 1.4 percentage points,” according to the release. The personal saving rate dipped a bit quarter over quarter, as the data show that personal saving was $1.13 trillion in the second quarter, an upward revision of $74.3 billion from the previous estimate. The personal saving rate — personal saving as a percentage of disposable personal income — was 5.2%  in the second quarter, compared with 5.4% revised rate in the first quarter.

The full release and tables show that personal consumption expenditures overall were 2.8% higher, which is a bit above the price increases noted above, implying that consumers are buying more goods (in terms of quantity). The pace of growth is slowing — the 2.4% annualized rate is lower than the 5.6% rate in the first quarter and the 3.2% annualized increase in the fourth quarter — but an uptick in disposable income may give some tailwind to spending.

A year-over-year comparison (not the annualized pace, but the actual “dollar amount”) of disposable income, as detailed by PYMNTS Intelligence below, shows the slowing pace as well:

Might there also be a bit of a boost to willingness to spend — at least in the near term — from more recent data?

Thursday also saw the release of the latest weekly initial claims for unemployment; the expectations had been for an increase in those claims. But the number of individuals filing new applications for unemployment benefits actually fell, to an adjusted 218,000 filings for the week that ended on Sept. 21.  The expectations had been for a 225,000 reading. The tempering of the pace of layoffs, if sustainable, may make consumers feel a bit more optimistic.

There’s certainly room for improvement, at least in terms of outlook. As we reported earlier this week, the consumer confidence index dropped to a reading of 98.7 this month, down from 105.6 last month, as detailed by the Conference Board. The board noted that this was the largest decline seen since August 2021. All five of the consumer confidence index components, spanning the outlook for the economy, inflation and concerns about the job market, deteriorated, the board said.  On that last point, 18.3% of consumers anticipated fewer jobs, up from 17%.