Monday, June 27, 2011

Personal Income increased 0.3% in May, PCE increased less than 0.1%

by Bill McBride on 6/27/2011 08:30:00 AM

Note: sorry for typos.

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

Personal income increased $36.2 billion, or 0.3 percent ... Personal consumption expenditures (PCE) increased $4.6 billion, or less than 0.1 percent.
...
Real PCE decreased 0.1 percent, the same decrease as in April.
The following graph shows real Personal Consumption Expenditures (PCE) through April (2005 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 in graph gallery.

PCE increased less than 0.1% in May, but real PCE decreased 0.1% as the price index for PCE increased 0.2 percent in May. The graph shows that real PCE declined in the first two month of Q2.

Note: The PCE price index, excluding food and energy, increased 0.3 percent.

The personal saving rate was at 5.0% in May.
Personal saving -- DPI less personal outlays -- was $591.1 billion in May, compared with $568.0 billion in April. Personal saving as a percentage of disposable personal income was 5.0 percent in May, compared with 4.9 percent in April.
Personal Saving rate This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the May Personal Income report.

The saving rate has declined recently even as growth for real personal consumption expenditures has slowed. Part of this is due to higher overall inflation and higher oil / gasoline prices.

This would have been the first monthly decline in real PCE since January 2010 - except April was revised down too. This puts real PCE growth in Q2 on pace for only about 1% (an average of Q2 over Q1) - the slowest pace since Q4 2009.