Personal Consumer Expenditure (PCE) spending edged up +0.1% in July, accompanied by flat personal income growth and a -0.1% drop in the savings rate to +3.8%. Overall spending was up $4.5 billion, with increases in health care spending offset by declines in spending on gasoline and durable goods. The core PCE price index, which measures inflation excluding food and fuel and is the Federal Reserve’s preferred index, was up +0.1% M/M, but remained steady at +1.5% Y/Y, well below the Fed’s 2.0% target rate.

The Institute for Supply Management’s Purchasing Managers Index (PMI) dropped to 56.3% for July after June’s 3-year high of 57.8%, indicating a cooling in the pace of economic expansion (PMI index values higher than 50% indicate growth). Of the 18 industries surveyed, all reported growth except for Textile Mills, Petroleum & Coal, and Apparel, Leather & Allied Products. Indexes for new orders and production remained above 60%, with prices for input raw materials increasing sharply (+7.0%), manufacturing inventories increasing slightly (+1.0%), and customer inventories dropping (-1.5%).

A much higher than expected 209,000 jobs were added in July, dropping the unemployment rate by -0.1% to 4.3% while the workforce participation rate rose +0.1% to 62.9%. Hourly earnings rose +0.3% in July (up $0.09 to $26.36), but the yearly change in hourly earnings remained at +2.5%, gaining $0.65 for the year. Employment increased significantly in food services and drinking places (53,000), in professional and business services (+49,000), and in health care (+39,000).