Personal income dropped by 2 percent in May to $414.3 billion, beating forecasts that expected it to decline more, according to estimates released Friday (June 25) by the Bureau of Economic Analysis (BEA).
The decline followed a reduction in federal pandemic relief funding, which fell by $500 billion last month. Jobless benefits also went down, led by a drop in payments from pandemic unemployment.
The current dollar personal consumption expenditure (PCE) in May was up $2.9 billion, driven by a $74.3 billion boost in spending on services, which was offset by a $71.5 billion decline in goods. Overall, the numbers in the report reflect signs of an opening economy and an improving job market, according to the BEA.
PCE inflation dropped 3.9 percent year over year and after adjustments for pandemic prices, the PCE reflected an increase of 2.6 percent. Core inflation — minus food and energy — went up 3.4 percent. The adjusted boost was an increase of 2.4 percent. The month-over-month elevation in core PCE was due to durable goods pricing.
Prices in service industries hit hard by the pandemic — such as airfare — dropped 0.7 percent, over 8 percent less than what the prices were before the COVID-19 pandemic took hold in the U.S. in March of last year.
The bottom 50 percent of low-income households experienced a 36 percent financial boost during the pandemic to a collective $2.62 trillion in the first quarter of 2021, Fed data showed. The top 1 percent of households by wealth also experienced an increase in income to $41.52 trillion.
The boost for the 1 percent largely was due to gains in the stock market. Increases from the bottom half of Americans came from a $3.61 trillion real estate increase, a $1.34 trillion boost in consumer durables, a $0.16 trillion elevation in corporate equities, and $0.82 trillion in pension entitlements, according to the report.
In a PYMNTS collaboration with LendingClub — Reality Check: The Paycheck-To-Paycheck Report — a survey of nearly 29,000 U.S. consumers conducted between March 2020 and May 2021 revealed that more than half of respondents have little or no money left after paying expenses.