U.S. PCE Price Index Steadies in May with Core Prices Minimally Higher; Spending Growth Improves

The PCE chain price index was unchanged in May following three consecutive 0.3% increases. The 2.6% y/y rise compares to its 7.1% y/y peak in June 2022. The price index excluding food and energy edged 0.1% higher, also following three consecutive 0.3% increases. The 2.6% y/y increase was the weakest since March 2021 and below the 5.6% peak in February 2022. Durable goods prices fell 0.8% (-3.2% y/y) after declining 0.2% in April while nondurable goods prices were off 0.2% (+1.6% y/y) following a 0.5% gain. Services prices rose 0.2%, down from a 0.7% in January increase. The 3.9% y/y rise stood below the 6.0% high in February 2023. Services prices excluding energy & housing increased 0.1% (3.4% y/y) after rising 0.3% in April. Food prices edged 0.1% higher (1.2% y/y) last month after declining 0.2% in April. Energy goods & services prices weakened 2.1% (+4.8% y/y) after rising 1.2% one month earlier.

Personal consumption expenditures (PCE) increased 0.2% (5.1% y/y) during May following a 0.1% rise, revised from 0.2%. A 0.3% increase had been expected in the Action Economics Forecast Survey. When adjusted for price changes, PCE rose 0.3% last month (2.4% y/y) after slipping 0.1% during April.

Real spending on durable goods rose 1.1% last month (1.7% y/y) after falling 0.7% in April, revised from 0.1%. Real spending on motor vehicles slipped 0.1% (-4.2% y/y) after rising 0.7%. Real home furnishings & appliance outlays strengthened 0.9% (2.9% y/y) after improving 0.2% in April while real spending on recreational goods & vehicles rose 2.6% (6.0% y/y) and recaptured the 2.4% April decline. Spending on other durable goods rose 0.8% (5.9% y/y) after falling 1.7% in April.

Real spending on nondurable goods rose 0.3% (1.6% y/y) last month after a 0.7% April decline. Real clothing and footwear purchases jumped 1.1% (1.9% y/y) following three consecutive monthly declines. Real food & beverage buying eased 0.1% (+0.9% y/y) for the second consecutive month. Real outlays on gasoline & other energy products recovered 1.3% (-0.1% y/y) and reversed April’s 1.3% fall. Spending on other nondurable goods rose 0.2% (2.8% y/y) following a 0.9% decline.

Real spending on services edged 0.1% higher (2.8% y/y) in May for the second consecutive month. Real spending on housing & utilities eased 0.1% (+1.1% y/y) after a 0.2% rise while real healthcare spending rose 0.2% (5.6% y/y) after rising 0.4%. Real spending on food services & accommodations fell 0.5% (+1.9% y/y) after holding steady in April while real spending on financial services & insurance rose 0.3% last month (2.7% y/y) after easing 0.1% in April. Real spending on transportation services increased 1.4% in May (0.9% y/y) after sharp declines in three of the prior four months.

Personal income rose 0.5% in May (4.6% y/y) after an unrevised 0.3% April increase. A 0.4% gain was expected. Wages & salaries rose 0.7% (5.1% y/y) after a 0.2% gain. Rental income rose 0.1% (8.4% y/y) after holding steady in April, and proprietors’ income was unchanged (+4.0% y/y) for a second month. Income from assets improved 0.4% (2.6% y/y) for the second straight month and current transfer receipts rose 0.3% (4.5% y/y) after rising 0.4% in April. Government social benefits rose 0.3% (4.4% y/y) after rising 0.4% in April.

Disposable personal income increased 0.5% (3.7% y/y) in May following a 0.3% April rise. After adjusting for price changes, disposable income also increased 0.5% (1.1% y/y) last month after holding steady in March.

The personal saving rate rose to 3.9% from 3.7% in April, revised from 3.6%. The rate was down from a May 2023 high of 5.3%. Personal saving rose 4.9% (-24.0% y/y) after increasing 4.3% in April.

The personal income and consumption figures are available in Haver’s USECON database with detail in the USNA database. The Action Economics forecasts are in AS1REPNA.