The May Personal Income and Outlays report from the U.S. Bureau of Economic Analysis showed that the headline personal consumption expenditures price index rose by 4.1% year over year, meeting expectations and up from April’s 3.8%. Core PCE inflation (excluding food and energy prices) increased 3.4% year over year, in line with expectations, and slightly above April’s 3.3%. Personal consumption expenditures increased $156.1 billion, or 0.7% month over month. The growth in expenditures was driven by increases of $94.3 billion in spending on services and $61.8 billion in spending on goods, about one third of which was from gasoline and other energy goods.
The ABA Office of the Chief Economist believes that the May data indicates inflationary pressures remain elevated and continue to move further away from the Federal Reserve’s 2% target. Persistent price growth continues to pressure household balance sheets, increasing risks to credit performance for consumer loans, especially for lower income households. However, to the extent that inflationary pressures moderate in the coming months, this could provide relief to consumers.
