Personal income climbed 0.4% in May, according to the most recent data release from the Bureau of Economic Analysis. Personal consumption expenditures inched up by 0.1% in May after strong gains in March and April. On a year-over-year comparison, personal consumption increased 4.2% in May.
Disposable personal income, income remaining after deducting personal income taxes, grew by 0.6% after accounting for inflation. This is the largest monthly growth over the past two years. Disposable personal income ended up with a 2.2 % annual increase.
The savings rate rose to 5.5%, as a result of income increasing more than spending. The savings rate declined through the second half of 2016, but was on an upward trend from the beginning of 2017. The savings rate rose with the onset of the Great Recession as households repaired their balance sheets. However, this process of deleveraging held back GDP growth due to reduced consumption.