U.S. Personal Income and Outlays – May 2018

Released Friday, June 29, 2018


Personal Income: +0.4% month-over-month (Cons: +0.4%), +4.0% year-over-year
Personal Consumption Expenditures: +0.2% month-over-month (Cons: +0.4%), +4.6% year-over-year
Core PCE Price Index: +0.2% month-over-month (Cons: +0.2%), +2.0% year-over-year
 Savings Rate: 3.2%, -0.6 percentage point (ppt) year-over-year

Quick Take:
Personal income rose +0.4% month-over-month in May, in line with economists’ estimates. Year-over-year personal income growth was +4.0%, up from +3.9% growth in April. Wages and salaries, which make up ≈50% of personal income, grew +4.9% year-over-year in May, up from +4.5% growth in April.

Real disposable income, an indicator of purchasing power, was up +0.2% month-over-month in May and rose +1.7% year-over-year, down from +2.0% growth in April. On a 6-month annualized basis, real disposable income was up +3.0% in May.

Nominal personal consumption rose +0.2% month-over-month in May, above economists’ expectations. Nominal personal consumption growth in May was driven by both services and goods consumption, which rose +0.1% and +0.4% month-over-month, respectively. Goods spending, which makes up approximately one-third of personal spending, rose +5.3% year-over-year in May, the second highest pace of growth in over six years. Real personal consumption was flat month-over-month in May after rising +0.3% in April and +0.6% in March. On a year-over-year basis, real personal consumption rose +2.3%, down from +2.6% in April.

While personal consumption came in below estimates in May, spending on household utilities held down month-over-month growth by -0.2 percentage points due to low electricity demand. However, spending remained healthy on the largest individual categories of personal consumption, including housing, healthcare, and financial services & insurance, which grew by +0.4%, +0.2%, and +0.5% respectively in May. With employee compensation and consumer spending both growing at a 4.6% year-over-year pace, the outlook for personal consumption growth remains sound on the back of a labor market exhibiting low unemployment and healthy job competition.

On the inflation side, month-over-month growth for the core PCE price index was +0.2% in May. Year-over-year growth was +2.0%, the highest pace of growth since April 2012. Core PCE inflation has risen by +0.2% in each of the last 6 months, and 6-month annualized growth was 2.3% as of May.