Back Economics

Real PCE growth has firmed, but not likely into a boom

Published on July 16, 2026

Gerard MacDonell

With the (strong) June auto SAAR and retail trade report now in hand, it looks like real PCE will have been up about 30 bps during the month. We might have expected a stronger gain based on the information in hand. But recall that 2/3 of personal consumption, largely services, is not informed by auto or retail sales. And growth momentum within this 2/3 has been steadily decelerating in recent months. For example, the 3-month change of the 3-month moving average has slowed monotonically from 3.8% (ar) in September to 0.5% in May. (I assume a gain of 15 bps in June.)

The estimate of overall PCE for June implies that real PCE will have been up by 2.1% (ar) during Q2, which is right in line with the Bloomberg consensus, although a nice improvement over the Q1 result of 0.5%. There is a positive launch effect for Q3, given that real PCE appears to have ended Q2 on a relatively strong note. For example, if growth were to run at 1.5% (ar) sequentially in July through September, the real PCE growth rate for the quarter would be 70 bps stronger at 2.2%.

I would, however, put the underlying trend of real PCE growth slightly lower, at about 1 ½%, just looking purely backward, for reasons that should be obvious in the chart above. The trend was a bit weaker than 1 ½% while energy prices were rising and a bit stronger very recently, but 1 ½% seems like a fair depiction of the momentum. Real income growth is running at a pace consistent with growth in a range of 1 ½ — 2%, assuming a minor nudge from positive wealth effects.

So, the consumer is fine, but not booming. With the speed limit being held down by low population growth and lingering inflation concerns, and with capital spending growth quite strong, consumer spending growth above what I take to be the trend would probably not be welcomed by the Fed. What we see is probably a decent proxy of what we will get.

Still around 1 1/2% trend, although firmer quite recently

*Source: BEA, FH estimates*
*Data are actual to May and estimate for June.*

DISCLOSURES AND DISCLAIMERS

Analyst Certification

The analyst, 22V Research Group, primarily responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this research report.

Analyst Certifications and Independence of Research.

Each of the 22V Research analysts whose names appear on the front page of this report hereby certify that all the views expressed in this Report accurately reflect our personal views about any and all of the subject securities or issuers and that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views of in this Report.

22V Research (the “Company”) is an independent research provider. The Company is not a member of the FINRA or the SIPC and is not a registered broker dealer or investment adviser. 22V Research has no other regulated or unregulated business activities which conflict with its provision of independent research.

22V Research, LLC is a professional services and independent publication organization. 22V Research, LLC is not a securities broker-dealer, not a member of the Financial Industry Regulatory Authority (FINRA), not a registered investment advisor (RIA) and not a member of SIPC.

Securities transactions, when offered, are offered by 22V Securities, LLC through LPS Capital, LLC. Certain employees of 22V Securities, LLC are dually registered as securities representatives of LPS Capital, LLC or Analyst Hub Securities, LLC. 22V Securities, LPS Capital and Analyst Hub Securities are members FINRA, SIPC.

https://brokercheck.finra.org/

Current Ratings Definition.

SECTOR OUTPERFORM: An “outperform” rating anticipates the company will outperform the S&P Regional Banking Index (peer group).

SECTOR PERFORM: A “market perform” rating anticipates the company will perform in line with the S&P Regional Banking Index (peer group).

SECTOR UNDERPERFORM: An “underperform” rating anticipates the company will underperform the S&P Regional Banking Index (peer group).

Limitation Of Research And Information.

This Report has been prepared for distribution to only qualified institutional or professional clients of 22V Research Group. The contents of this Report represent the views, opinions, and analyses of its authors. The information contained herein does not constitute financial, legal, tax or any other advice. All third-party data presented herein were obtained from publicly available sources which are believed to be reliable; however, the Company makes no warranty, express or implied, concerning the accuracy or completeness of such information. In no event shall the Company be responsible or liable for the correctness of, or update to, any such material or for any damage or lost opportunities resulting from use of this data. Nothing contained in this Report or any distribution by the Company should be construed as any offer to sell, or any solicitation of an offer to buy, any security or investment. Any research or other material received should not be construed as individualized investment advice. Investment decisions should be made as part of an overall portfolio strategy and you should consult with a professional financial advisor, legal and tax advisor prior to making any investment decision. 22V Research Group shall not be liable for any direct or indirect, incidental or consequential loss or damage (including loss of profits, revenue or goodwill) arising from any investment decisions based on information or research obtained from 22V Research Group.

Reproduction And Distribution Strictly Prohibited.

No user of this Report may reproduce, modify, copy, distribute, sell, resell, transmit, transfer, license, assign or publish the Report itself or any information contained therein. Notwithstanding the foregoing, clients with access to working models are permitted to alter or modify the information contained therein, provided that it is solely for such client’s own use. This Report is not intended to be available or distributed for any purpose that would be deemed unlawful or otherwise prohibited by any local, state, national or international laws or regulations or would otherwise subject the Company to registration or regulation of any kind within such jurisdiction.

Copyrights, Trademarks, Intellectual Property.

22V Research Group, and any logos or marks included in this Report are proprietary materials. The use of such terms and logos and marks without the express written consent of 22V Research Group is strictly prohibited. The copyright in the pages or in the screens of the Report, and in the information and material therein, is proprietary material owned by 22V Research Group unless otherwise indicated. The unauthorized use of any material on this Report may violate numerous statutes, regulations and laws, including, but not limited to, copyright, trademark, trade secret or patent laws.