Personal income continued its steady growth of 0.2% in May as consumer credit failed to grow, leading the savings rate to increase slightly. Personal income continued to expand, matching its rate from the previous month. Although it is a good sign personal income is holding steady, it is at low levels. April and May’s growth are the slowest since November.
Consumer spending failed to grow for the first time since November, led lower by goods purchases. Service spending held up well, continuing to expand at 0.3% in May. Durable and non-durable purchases fared the worst falling 0.4% and 0.8% respectively. Both durable and non-durable goods spending have fallen for the past two months.
Consumers benefitted from lower prices in May as the PCE deflator fell 0.2% on lower energy prices. Core prices saw modest gains, rising 0.1%. The falling overall prices meant that, inflation adjusted, personal income grew 0.4% in May, with consumption growing 0.2%.
The combination of rising income and consistent consumption meant that the savings rate rose in May to 3.9%, its highest level since the beginning of the year.
Read the BEA report.