Thursday, June 26, 2014

Personal Income Growth Outpaced Consumption in May

Personal income grew 0.4% in May, an increase of the pace from the month prior. Personal consumption improved 0.2%, which caused the savings rate to increase to 4.8%. Personal income increased 3.5% from year ago levels and consumption increased 3.7%.

Wage growth was stronger in May than the previous month, at 0.4%. Disposable income, which improved 0.4% in May, was also slightly stronger than the previous month. Similar to the month prior, dividend growth was the driver behind income growth in May. Real personal consumption growth remained stagnant and real personal income grew 0.2%.

The improved wage growth, combined with stronger job growth, will result in people feeling more financially confident, causing an increase in consumer spending.

Inflation remained at low levels as the PCE deflator rose 0.2% in May, 1.8% above year-ago levels. While the annual rate is an improvement from last month, inflation remained below the 2.0% target of the Federal Reserve.

Read the BEA release.

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