In its report on personal income and spending for May, the US Bureau of Economic Analysis data shows that personal income in current dollars grew by 0.2%, while personal spending (called ‘personal consumption expenditures’ or PCE) remained flat. Real disposable personal income rose 0.3% and real PCE rose 0.1%. ‘Real’ figures are given in chained 2005 dollars.
Digging a little deeper into the report, payrolls fell by $7 billion in goods-producing industries and by $4.5 billion in manufacturing. Services-producing industries saw payrolls grow by $8.3 billion and government pay increased by $300 million. Overall, payrolls rose $1.1 billion in May.
Disposable personal income — income less taxes — rose by $18.5 billion in May, up 0.2% compared with April. Personal outlays (spending) fell -$7.0 billion compared with an increase in spending of $13.9 billion in April.
The rise in disposable income is due partly to falling pump prices for gasoline. If, as some predict, gasoline reaches $3/gallon and stays there, US drivers would spend about $1 billion/month less on fuel. What appears to be happening, though, is that consumers are saving the money and not spending it.
Recent reports on consumer confidence in the economy would tend to backup the savings conclusion. A substantial drop in unemployment and a rise in real wages would do a lot to restore consumer confidence, but neither appears to be on the horizon.