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Wells Fargo forecasts modest July spending as inflation cools gradually

The firm expects nominal personal income to rise 0.3% and sees the PCE deflator climbing 0.1% in July, with core PCE at 3.3% year over year.

Reported · Written up by our desk · Economy

Wells Fargo Economics, led by Tom Porcelli and colleagues, projects July consumer spending to increase modestly, with nominal personal income up 0.3% and spending up 0.2%. The note flags that the cushion from larger-than-usual tax refunds is fading, making demand more dependent on underlying income growth.

The economists expect PCE inflation to ease gradually, with the PCE deflator rising 0.1% in July. They forecast the year-over-year rate at 3.6%, alongside a 0.2% monthly increase in core PCE that would leave core inflation at 3.3% year over year.

They also point to what they see as market-relevant drivers behind the data, saying consumer spending appeared to hold up in July even as some headline retail sales were distorted. Wells Fargo attributed weakness largely to lower gasoline prices and a calendar effect tied to the shift of Amazon Prime Day into June.

Latest closeGasoline (RBOB) $2.901 ▼7.3%

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