Income Falls While Spending Was Unchanged in May

It was an uneventful May with regards to income and spending, according to the latest data from the Bureau of Economic Analysis (BEA)

  • Personal income fell 414 billion (2.0%) to 20.8 trillion
  • Personal Consumption Expenditures was essentially flat increasing just 2.9 billion (0.1%) to 15.6 trillion.

The Personal savings rate fell to 12.4%, down from 14.5% in April and down from the high this year seen in March at 27.6%.

The worrying news was the PCE, better known as the Federal Reserves favorite inflation gauge…

  • The core PCE Price Index jumped 0.5% from April and was up 3.4% for the year. This was the highest reading since 1991.
  • The headline PCE index was up 0.4% month-over-month and 3.9% year-over-year. This was the highest reading since 2001.

To end on a positive note. The decrease in personal income in May primarily reflected a decrease in government social benefits, not a decrease in the private sector.