Data also show inflation remained tame

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Personal income in the U.S. fell by $109.6 billion (0.4%) in May, driven primarily by declines in government benefits and farm income.
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Consumer spending also dipped, with personal consumption expenditures dropping $29.3 billion (0.1%), largely due to reduced spending on goods.
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Inflation remained modest, with the PCE price index rising 0.1% in May and 2.3% compared to a year ago.
Americans personal income and spending both took a hit in May, according to new data from the U.S. Bureau of Economic Analysis (BEA). Personal income declined by $109.6 billion, or 0.4% on a monthly basis, as the country experienced a pullback in government social benefits and a decrease in farm proprietors income.
Disposable personal income (DPI), which measures income after taxes, dropped even more sharply down $125 billion or 0.6% signaling increased financial pressure on households. Real DPI, which adjusts for inflation, fell 0.7%.
Meanwhile, consumer spending also contracted, with personal consumption expenditures (PCE) falling $29.3 billion or 0.1%. The decline was largely due to a $49.2 billion reduction in spending on goods, partially balanced by a $19.9 billion increase in services expenditures. When adjusted for inflation, real PCE declined 0.3%.
Consumers spent less
The personal outlays figure, which includes spending, interest payments, and transfer payments, also decreased by $27.6 billion. The nations saving rate in May stood at 4.5%, with Americans saving approximately $1.01 trillion.
Inflation data in the report showed moderate growth. The PCE price index rose 0.1% from April and 2.3% compared to May 2024. Core inflation, which excludes food and energy, rose 0.2% from the previous month and 2.7% over the year.
The May data highlights a potential cooling in consumer activity, a key driver of the U.S. economy, amid declining income sources and persistent, though stable, inflationary pressures. Economists will be watching closely in the months ahead to assess whether these shifts are temporary or the start of a broader trend.
Posted: 2025-06-27 14:17:42