Friday, June 29, 2018

Personal Income increased 0.4% in May, Spending increased 0.2%

by Bill McBride on 6/29/2018 08:36:00 AM

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

Personal income increased $60.0 billion (0.4 percent) in May according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $63.2 billion (0.4 percent) and personal consumption expenditures (PCE) increased $27.8 billion (0.2 percent).

Real DPI increased 0.2 percent in May and Real PCE decreased less than 0.1 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.2 percent.
The May PCE price index increased 2.3 percent year-over-year (up from 2.0 percent YoY in April) and the May PCE price index, excluding food and energy, increased 2.0 percent year-over-year (up from 1.8 percent YoY in April).

The following graph shows real Personal Consumption Expenditures (PCE) through May 2018 (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 at expectations,  and the increase in PCE was below expectations.

Using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 3.0% annual rate in Q2 2018. (using the mid-month method, PCE was increasing 3.4%). This suggests decent PCE growth in Q2, but below expectations.   (Estimates for Q2 GDP will be revised down).