Worker incomes, which include wages, interest, and government benefits, were flat in July, compared with a 0.7% spike in June. Wages and salaries actually fell by 0.2%, according to the Commerce Department. Disposable or after-tax incomes rose by 0.2% after a 0.7% increase the month before.
Income growth was weaker than the 0.2% increase anticipated by many analysts, while the 1% growth in spending was stronger than the 0.7% increase anticipated. In fact, July’s spending increase was the largest – and the incomes the lowest – since October.
With spending outpacing income growth in July, the nation’s personal savings rate – savings as a percentage of after-tax income – dipped to 3.4% in July from 4.2% in June. That was the smallest rate since December.