US: Personal income increases significantly in May


In May, both US personal income and spending picked up. Personal income rose by 0.5% M/M, significantly stronger than the expected 0.2% M/M increase. Also the previous figure was upwardly revised from 0.0% M/M to 0.1% M/M.
The details show that wage & salary increased by 0.3% M/M in May, up from 0.1% M/M in April. Personal spending increased by 0.3% M/M in May, after falling by a revised 0.3% M/M in April. The outcome was in line with expectations. As a result, the savings rate rose from 3.0% to 3.2%, after already a significant increase in April. After falling significantly in the previous two months, the PCE deflator picked up in May, in line with the pick-up in CPI inflation. The PCE deflator rose from 0.7% Y/Y to 1.0% Y/Y, slightly less than expected (1.1% Y/Y).



EMU: Commission indicators confirm recent recovery


In June, European Commission’s economic confidence improved for a second straight month, reaching its highest level in more than one year. Economic confidence rose from 89.5 to 91.3, while a more limited increase was expected. The details show that the improvement was based in industrial (-11.2 from -13), retail (-14.4 from -16.7) and construction (-32.2 from -33.6) confidence.
Consumer confidence was confirmed at -18.8, sharply up from -21.9 in May.
Slightly disappointing was however an unexpected weakening services sector sentiment (-9.5 from -9.2), although the decline was very limited. Looking at the national data, the improvement was again led by Southern European countries as Spain (92.3 from 89.8), Italy (86.6 from 84.9) and Portugal (85.3 from 84.2), while economic sentiment weakened slightly in Greece (93.5 from 93.8), probably due to renewed political uncertainty. Also in most core countries, the recovery sustained. Germany (99.8 from 98.7), Belgium (90.7 from 89.7), France (89.5 from 88.6) and the Netherlands (89.5 from 88.6) showed an improvement, while sentiment weakened slightly in Luxembourg (84.6 from 84.9) and Austria (91.1 from 92.1). The European Commission confidence indicators provide further evidence that the euro area economy is slowly recovering, remaining on track for a return to growth in the second half of the year. The weakening in services sentiment suggests however that domestic demand continues to struggle as unemployment rates continue to rise, weighing on consumer spending.


The annual growth rate of M3 slowed from 3.2% Y/Y to 2.9% Y/Y in May, in line with expectations. The slowdown was due to base effects as the monthly flow increased by €28 billion. Lending data remained however disappointing. Loans to the private sector dropped by €33 billion in May, after falling already by €28 billion the month before. As a result, the annual rate of contraction accelerated to -1.1% Y/Y from -0.9% Y/Y. Loans to non-financials dropped another €17B, the same pace as in the previous month. Compared with last year, loans to non-financials are down by 3.1% Y/Y. Growth in loans to households slowed further in May, from 0.4% Y/Y to 0.2% Y/Y, due to a €8 billion drop in May, after only a marginal increase in the previous month. Loans to households were overall weak. While lending to non-financials continues to suffer, also lending to households is weakening again recently after some pick up at the end of last year and early this year. As the euro zone economy is staring to recover, we hope to see some improvement in the lending data too in the months to come.