August Personal Income Lags Expectations, Consumption Matches Consensus
By TopHolding Editorial · Tuesday, September 29, 2026 at 8:00 PM
According to Brian Wesbury, Chief Economist at First Trust Portfolios, personal income growth of 0.2% in August lagged expectations, while personal consumption increased by 0.9%, matching forecasts. The firm notes recent benchmark revisions suggest faster income growth and lower inflation than previously thought, which could impact the Federal Reserve's future rate hike decisions.
According to Andrew Opdyke, Senior Economist, Brian Wesbury, Chief Economist, and Robert Stein, Deputy Chief Economist at First Trust Portfolios, personal income saw a 0.2% rise in August, falling short of the consensus expectation of a 0.5% increase. Conversely, personal consumption expenditure (PCE) grew by 0.9%, aligning with market forecasts. Wesbury and his team note that personal income has climbed 4.3% over the past year, while spending has increased by 6.1%.
First Trust's economists highlight that benchmark revisions to data extending back to early 2021 reveal that incomes grew more rapidly, inflation was lower, and the savings rate was higher than previously reported. They argue these revisions to inflation data have "lowered the odds of another hike" at the upcoming October Federal Reserve meeting, although they still anticipate a rate hike in December. The overall PCE deflator, a measure of consumer prices, increased 0.3% in August and stands 3.4% higher year-over-year. The "core" PCE deflator, which excludes volatile food and energy components, rose 0.2% in August and is up 3.0% annually.
After accounting for inflation, real consumption saw a 0.6% increase in August and has grown 2.6% over the past year. Opdyke, Wesbury, and Stein observe that while private sector wages and salaries grew by 0.3% in August (up 4.7% year-over-year), above-trend inflation has significantly eroded consumers’ purchasing power. On the spending side, consumption gains in August were led by categories such as gasoline and other energy goods, food services, accommodations, and autos. The economists note that August marked the fifth month in 2026 with consumption growth exceeding 0.5%, outpacing both inflation and income growth. This trend has pushed the personal saving rate down to 4.1% in August, a level near its lowest since 2022, which First Trust's team asserts is not sustainable in the long term.
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Key terms
1. Personal Consumption Expenditures (PCE): A measure of how much money people are spending on goods and services. It is a key indicator of consumer spending and overall economic health.
2. PCE Deflator: A measure of inflation that tracks the average change in prices for all goods and services purchased by consumers. The "core" PCE deflator excludes volatile food and energy prices to provide a clearer picture of underlying inflation trends.
3. Personal Saving Rate: The percentage of disposable personal income that is not spent or paid out in taxes. It indicates the proportion of income that households save.
Source: Andrew Opdyke, CFA – Senior Economist, Brian S. Wesbury – Chief Economist, Robert Stein, CFA – Dep. Chief Economist, First Trust Portfolios — Data Watch. Read the original at ftportfolios.com.
