Personal incomes fell less than expected in May, while spending was unchanged, government data showed Friday.
Incomes dropped 2%, better than the 2.5% decline economists forecast. Spending was seen rising 0.4% from April.
Upward revisions to prior months may cushion any disappointment from the below-consensus spending print. The numbers have been difficult to parse in 2021 due to the ebb and flow of fiscal stimulus, which turned the chart (below) into a wild-looking EKG.
The BEA described the gradual stimulus “fade.” “The decrease in personal income in May primarily reflected a decrease in government social benefits… as economic impact payments continued, but at a lower level than in April,” the government said. “Unemployment insurance also decreased, led by decreases in payments from the Pandemic Unemployment Compensation program.”
The “other” category (from government social benefits) told the story (figure below).
Nearly $75 billion in spending for services last month was mostly offset by a near $72 billion decrease in spending for goods. Americans spent more on recreation, food, housing and utilities, while trimming outlays for cars. Prices for used vehicles have obviously surged.
On the inflation front, PCE prices rose 0.4% MoM, cooler than anticipated. Core prices rose less than expected as well, moving 0.5% higher from April, compared to an expected 0.6% increase. The YoY prints were, of course, very elevated (3.9% and 3.4%) but the market will take solace in the below-consensus monthly reads.
All in all, this was a benign set of data, a welcome development as equities looked to extend gains after erasing the entirety of the post-FOMC pullback.
