Personal income for Americans rose by 0.5 percent in May, according to a new report from the U.S. Department of Commerce. That was better than the 0.3 percent gain analysts expected, the 38th increase in the past 39 months, and enough to lift the annual rate of growth to a 5-month high of 4.1 percent. Inflation-adjusted disposable income increased at the fastest pace of 2019, and the personal saving rate remained near the low-end of the range for the current business cycle. Consumer spending, which accounts for the bulk of the U.S. economy (GDP), also rose in May.
The 0.4 percent gain was slightly weaker than expected but the April increase was revised higher to 0.6 percent. The solid spending figures bode well for gross domestic product growth in the second quarter and will help offset any potential pullback in consumption in June that could result from Tuesday’s softer reading on consumer confidence. Elsewhere in the report, the core PCE deflator, the Federal Reserve’s preferred measure of household price changes, rose by 0.2 percent in May and 1.6 percent over the past year. Both figures were above estimates, and the 3-month annualized gain jumped to 2.0 percent. This supports Fed chair Powell’s earlier argument that recent weakness in inflation is transitory, and will likely make it difficult for monetary policymakers to justify being as dovish as the market expects at the next FOMC meeting later this month.
Sources: Econoday, U.S DoC, ZH, Twitter, CME, FRBSL