The most recent U.S. Personal Income and Consumption data show that U.S. consumer confidence remains strong, despite recent job losses, and a lagging manufacturing sector.

Both personal income and spending were slightly above expected in June, up 0.3% and 0.4% respectively, while the savings rate dropped by 0.1% to 1.1%. Inflation remains well under control, and shows no sign of accelerating says BMO Nesbitt Burns, noting, “Even though the U.S. labour market has eased and manufacturing has weakened substantially, incomes and spending are advancing solidly, if unspectacularly.”

The rise in spending was mainly due to expenditures on durable goods, which were 1.5% higher. With income tax rebate cheques starting to arrive, the outlook for spending remains positive, observes BMO. “Personal incomes have continued to grow, although the year-on-year increase has ebbed to 5.1%. Still, income growth remains well above the lows of 3.1% observed during the last recession in 1991. Spending growth of 5.5% year-on-year also remains above the recession lows. Further confirming the unrecession-like behaviour of consumers, real spending was up 3.1% from last year, whereas it was negative on several occasions during the last recession.”

BMO Nesbitt’s economists suggest that, “the U.S. economy seems poised to skirt by without a recession. This report reinforces the view that the need for interest rate action is mainly from the production side of the economy, as the consumer side remains quite healthy, and inflation poses no barrier.”