EconUpdate by P. Duffy
Inflation tracker PCE Price Index up 0.4 percent in May and 3.9 percent year-on-year
What does this mean? Although the monthly increases are subsiding, year-over-year increases are showing the highest inflation numbers in decades, which may be transitory.
The Fed-preferred PCE Price Index rose 0.4% in May vs. 0.6% in April and March and its year-over-year increase rose to 3.9%, for the highest jump since 2001. The ‘core’ index — which subtracts out more volatile prices for food and energy — rose 0.5% in May vs. 0.7% in April and 0.4% in March, and its year-over-year increase jumped to 3.4%, for the highest jump since 1991.
Personal income slips 2.0 percent and personal spending flat in May
What does this mean? Most of the decline in personal income was due to a reduction in stimulus spending and fewer payments from the pandemic unemployment compensation program.
In May, personal income decreased 2.0 percent, disposable personal income (DPI) fell 2.3 percent, and personal consumption expenditures (PCE) increased $2.9 billion less than 0.1 percent. The personal saving rate fell from 14.5 to 12.4 percent, still high by historic measures but down substantially from 27.6 percent in March.
June consumer sentiment index improves 3.1 percent from May and 9.1 percent year-over-year
What does this mean? Consumers remain fixated on inflation, unemployment, and interest rates as the pandemic in the U.S. id controlled.
Although consumer sentiment slipped in late June, it still remained 3.1% above the May reading and up 9.1% year-on-year, and the second highest since the start of the pandemic. While many are optimistic about a gradual end to the pandemic, consumers still judged the risks from emerging covid variants as appreciable. It is likely that consumers will not reduce their savings and wealth to pre-pandemic levels, but maintain a higher level of precautionary funds.