U.S. Personal Spending Slows in May but Income Improves; Prices Rise Minimally

Personal consumption expenditures (PCE) increased 0.1% during May (6.0% y/y) following a 0.6% April advance, revised from 0.8%. A 0.2% rise had been expected in the Action Economics Forecast Survey. Adjusted for prices, real PCE was little changed (+2.1% y/y) after rising 0.2% in April. Real PCE has been roughly unchanged for three of the last four months.

Real spending on durable goods dropped 1.2% (+2.4% y/y) in May following a 0.8% April increase. Spending on motor vehicle & parts declined 4.3% (+4.3% y/y) after a 0.5% rise. Real spending on furniture & appliances rose 1.0% (0.7% y/y) for the second consecutive month. Real spending on recreational goods & vehicles rose 0.5% (3.8% y/y) after a 1.2% rise in April.

Real spending on nondurable goods held steady last month (0.4% y/y) after a 0.4% April. Real apparel spending fell 0.3% (-1.1% y/y) after a 0.2% gain. Outlays on gasoline & other energy products rose 0.4% (2.4% y/y) last month following a 0.2% decline in April while real food & beverage outlays edged 0.1% higher (-0.7% y/y) following a 0.4% gain.

Real spending on consumer services improved 0.2% (2.6% y/y) in May after a 0.1% uptick. Recreation services buying declined 0.3% (+3.5% y/y) after a 0.5% gain while real hotel & restaurant spending declined 0.2% (+2.0% y/y) following a 0.1% improvement. Real transportation services outlays rose 1.5% (0.9% y/y) for the second consecutive month while real housing & utilities expenditures eased 0.1% (+0.7% y/y) after a 0.4% decline. Real healthcare spending gained 0.2% (6.7% y/y) last month for the second consecutive month. Financial services & insurance expenditures rose 0.5% (2.7% y/y) after a 0.9% April increase.

Personal income rose 0.4% (5.5% y/y) after increasing 0.3% in February, revised from 0.4%. A 0.4% rise had been expected. The gain reflected a 0.5% increase (5.7% y/y) in wages & salaries which followed a 0.4% increase in April. Proprietors' income rose 0.3% (3.8% y/y) last month following a 0.6% decline. Rental income edged 0.1% higher (11.7% y/y) after a 0.8% April rise. Receipts on assets rose 0.3% (5.0% y/y) after a rise of 0.4% while interest income rose 0.5% (6.7% y/y) for the second consecutive month. Dividend income improved 0.1% (3.2% y/y) following a 0.3% gain. Personal transfer receipts rose 0.3% (5.4% y/y) in May after easing 0.1% in April.

Disposable income rose 0.4% (8.0% y/y) in May following a 0.3% rise in April. Taxes rose 0.2% (-9.0% y/y) after holding steady in February. Real disposable earnings rose 0.3% (4.0% y/y) last month, following a 0.1% dip in April.

The personal saving rate rose to 4.6% in May from 4.3% in April. It equaled the highest rate since January 2022. The level of personal savings increased 7.6% (47.8% y/y) last month.

The PCE chain price index edged 0.1% higher (3.8% y/y) last month after a 0.4% April gain. The index excluding food & energy rose 0.3% (4.6% y/y), about as it did in the prior three months. Goods prices eased 0.1% (+1.1% y/y), while services prices gained 0.3% (5.3% y/y). The PCE services price index excluding energy & health care increased 0.3% (6.3% y/y), down from highs of 0.7% in both August & September of last year. Energy prices fell 3.9% (-13.4% y/y) in May following a 0.7% rise (-13.4% y/y) in April, while food prices edged up 0.1% (5.8% y/y) after easing modestly in both of the prior two months.

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.