Personal Income Pulls Back as Government Benefits Weaken

Despite a massive recovery in the stock market and trillions of dollars of stimulus, the U.S. economy is firmly in a recession. Friday’s round of economic numbers seemed to reflect this.

Personal income decreased 4.2% year over year to $874.2 billion for the month of May, according to estimates released Friday by the Bureau of Economic Analysis. Disposable personal income (DPI) decreased 4.9% to $911.1 billion and personal consumption expenditures (PCE) increased 8.2% to $994.5 billion.

Separately, the so-called real DPI decreased 5.0% in May and real PCE increased by 8.1%. The PCE price index increased 0.1%. Excluding food and energy, the PCE price index increased 0.1%.

The decrease in personal income in May primarily reflected a decrease in government social benefits to persons as payments made to individuals from federal economic recovery programs in response to the COVID-19 pandemic continued, but at a lower level than in April.

The $892.6 billion increase in real PCE in May reflected an increase of $590.4 billion in spending for goods and a $363.8 billion increase in spending for services. Within goods, spending on motor vehicles and parts, as well as recreational goods and vehicles, were the leading contributors to the increase. Within services, the largest contributors to the increase were spending for health care, as well as food services and accommodations.