Thursday, June 25, 2015

Personal Income increased 0.5% in May, Spending increased 0.9%

by Bill McBride on 6/25/2015 08:46:00 AM

The BEA released the Personal Income and Outlays report for May:

Personal income increased $79.0 billion, or 0.5 percent ... in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $105.9 billion, or 0.9 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.6 percent in May, compared with an increase of less than 0.1 percent in April. ... The price index for PCE increased 0.3 percent in May, compared with an increase of less than 0.1 percent in April. The PCE price index, excluding food and energy, increased 0.1 percent in May, the same increase as in April.

The May price index for PCE increased 0.2 percent from May a year ago. The May PCE price index, excluding food and energy, increased 1.2 percent from May a year ago.
The following graph shows real Personal Consumption Expenditures (PCE) through May 2015 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Personal Consumption Expenditures Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was higher than expected.  And the increase in PCE was above the 0.7% increase consensus.  A strong report.

On inflation: The PCE price index increased 0.2 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.2 percent year-over-year in May.

Using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 3.1% annual rate in Q2 2015 (using the mid-month method, PCE was increasing 4.2%). This suggests a rebound in PCE in Q2, and decent Q2 GDP growth.