Continued weakness in disposable income growth points to a material economic slowdown

The latest personal income and spending data pointed to a continued weakening in the US economy, reinforcing my current expectation for multiple 2H24 rate cuts.

Real disposable income declines for the second time in the past three months

After falling in February, real disposable income declined again in April, falling by 0.06% MoM.

This resulted in 3-month annualised growth falling to just 0.01%, its lowest level since June 2022, while 6-month annualised growth dropped to 1.4%. YoY growth fell to 1.0%, its lowest level since December 2022.

YoY growth is now significantly below its monthly average growth rate of 3.1% YoY that was recorded across 2015-19.

With savings rates significantly tapped out, weak disposable income growth has materially impacted the outlook for consumer spending