Personal consumption expenditures (PCE) in the United States rose US$2.9 billion last month but disposable personal income (DPI) fell $436.3 billion or 2.3 per cent.

According to estimates by the Bureau of Economic Analysis, personal income in the United States fell $414.3 billion, down two per cent in May. Real DPI for the month fell by 2.8 per cent, while real PCE fell by 0.4 per cent.

The US BEA reports that goods fell by two per cent, while services rose by 0.4 per cent. As a result, the PCE price index grew by 0.4 per cent. However, the PCE price index, excluding food and energy, inched up by 0.5 per cent. 

The BEA reported, “the decrease in personal income in May primarily reflected a decrease in government social benefits. Within government social benefits, “other” social benefits decreased as economic impact payments made to individuals from the American Rescue Plan Act of 2021 continued, but at a lower level than in April.”

Decline in unemployment insurance

Unemployment insurance registered a decline, led by decreases in payments from the Pandemic Unemployment Compensation programme. The $2.9 billion increase in current dollar PCE in May represented an increase in expenditure for services of $74.3 billion.

This figure was mainly offset by a $71.5 billion fall in spending for goods. Increases in service spending were widespread, driven by spending on recreation services, food and accommodation, as well as housing and utilities.

The primary contributor to the reduction in goods was a fall in spending on motor vehicles and parts. Personal spending grew by $5.5 billion in May. 

Personal saving was $2.29 trillion in May with a personal saving rate of 12.4 per cent (personal saving as a proportion of disposable personal income).

The PCE price index climbed 3.9 per cent from the previous year in May, showing increases in both goods and services. Energy cost climbed by 27.4 per cent, while food prices increased by 0.4 per cent.

Excluding food and energy, the PCE price index climbed 3.4% from the previous year in May.