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US personal spending rises 0.2% in May

Personal consumption expenditures (PCE) in the United States increased by 0.2% or $47.8 billion (£37.6 billion) in May compared to April, according to the Bureau of Economic Analysis.

This data indicates a modest rise in consumer spending, reflecting a cautious but steady economic recovery.

Income growth accelerates to 0.5%

In contrast to the slower growth in PCE, personal income saw a more significant increase of 0.5% or $114.1 billion (£89.7 billion) in the same period. This rise in personal income highlights a stronger financial foundation for American households, potentially driven by wage gains and other income sources.

Disposable personal income, which adjusts for taxes and other mandatory expenses, also climbed by 0.5% or $94 billion (£73.9 billion).

PCE price index and inflation trends

The PCE price index, which is closely monitored by the Federal Reserve as an inflation indicator, rose by 2.6% on a yearly basis in May. It recorded a slight decline of 0.1% from April, suggesting a marginal easing in monthly inflation pressures. The core PCE index, which excludes volatile food and energy prices, also grew by 2.6% annually and edged up by 0.1% monthly.

Economic implications and consumer behaviour

The data on PCE and income growth provides valuable insights into the current economic climate and consumer behaviour.

The modest increase in PCE suggests that consumers are maintaining a cautious approach to spending despite rising incomes.

This could be attributed to various factors, including concerns about inflation, interest rates, and overall economic uncertainty.

Economists and policymakers will closely watch these trends as they provide essential clues about the health of the economy and the effectiveness of monetary policies.

The Federal Reserve’s decisions on interest rates and other measures are likely to be influenced by the PCE data and its implications for inflation and economic growth.

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