Inflation Causes Real Disposable Income to Slip in June

The most recent data release from the Bureau of Economic Analysis (BEA) showed that personal income increased 0.6% in June, making its ninth monthly increase in the past 12 months. Gains in personal income are largely driven by increases in compensation of employees and proprietors’ income. Real disposable income, income remaining after adjusted for taxes and inflation, decreased 0.3% in June relative to the upwardly revised May estimates.

Personal consumption expenditures (PCE) climbed 1.1% in June after a 0.3% increase in May, largely due to the surge in prices. Real spending, adjusted to remove inflation, inched up 0.1% in June, recovering from the decline of 0.3% in May.

The personal savings rate slipped further to 5.1%, the lowest rate since September 2009. As Inflation almost wiped out compensation gains, people are dipping into savings to support spending.

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