In addition to yesterday’s upgrade to GDP, the same report showed a sharp uptick in y/y profits to 16.1%, the most in 6.5 yrs. Apparently the corporate tax cut helped because taxes have now fallen a steep 33% y/y, the most in 9.5 years.
Real Personal Consumption expenditures (PCE) ticked up 0.2% in July to a 2.8% y/y rate – as recently as March it had been only 2.2%. Consumption would have been higher except for weak durables driven by a slump in auto sales. Real disposable personal income also ticked up 0.2% to a solid 2.9% y/y rate. And the personal savings rate is now at a comfortable 6.7%.
In the same report, headline PCE inflation rose to 2.3% vs. only 1.8% at the beginning of the year. And core PCE inflation, the Fed’s favored measure, rose to the Fed’s target of 2.0% vs. 1.6% at the beginning of the year.
So GDP and business investment are strong, inflation is just about right, corporate profits are powerful, retailers are rebounding, income is incoming, and consumers are consuming. What’s not to like?