U.S. personal income rises in May as spending and inflation measures move higher

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US income and spending rise

Highlights

U.S. personal income and disposable personal income each rise 0.7 percent in May, increasing by $181.6 billion and $164.9 billion respectively.
Personal consumption expenditures increase by $156.1 billion or 0.7 percent, with services up $94.3 billion and goods up $61.8 billion in May.
PCE price index rises 0.4 percent month over month and 4.1 percent year over year, while core PCE increases 0.3 percent monthly and 3.4 percent annually.

May income and spending data

As reported by the U.S. Bureau of Economic Analysis, personal income increases by $181.6 billion, or 0.7 percent at a monthly rate, in May, while disposable personal income rises by $164.9 billion, also 0.7 percent. Personal consumption expenditures increase by $156.1 billion, or 0.7 percent, and personal outlays, which include spending, interest payments and transfer payments, rise by $159.9 billion.

The increase in personal income primarily reflects gains in farm proprietors’ income and compensation. The farm income gain reflects higher payments from the American Relief Act of 2025, after the U.S. Department of Agriculture issues a second round of Supplemental Disaster Relief Program payments to producers. Within compensation, private wages and salaries lead the increase, based on Current Employment Statistics from the U.S. Bureau of Labor Statistics.

The rise in current-dollar consumer spending reflects a $94.3 billion increase in services spending and a $61.8 billion increase in goods spending. Real personal consumption expenditures, which adjust for inflation, increase by $43.8 billion, or 0.3 percent at a monthly rate, in May.

Inflation and household financial implications

The PCE price index increases 0.4 percent from the previous month in May, while the core measure excluding food and energy rises 0.3 percent. On an annual basis, the PCE price index is up 4.1 percent and the core PCE price index increases 3.4 percent from a year earlier.

Personal saving totals $704.2 billion in May, and the personal saving rate, measured as saving as a share of disposable personal income, is 3.0 percent. The figures suggest income growth continues to support consumer spending, although the pace of price increases remains a key factor for household purchasing power and the broader economic outlook.

In our earlier coverage of May PCE inflation data and its implications for Fed policy, we noted that the headline PCE price index remained elevated at 4.1% year over year, with core PCE at 3.4%, reinforcing concerns about sticky price pressures. We also highlighted that both personal income and consumer spending rose 0.7% in May, a combination that suggested demand was holding up and could keep the Fed leaning restrictive for longer.

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