by Calculated Risk on 6/28/2010 08:30:00 AM

From the BEA: Personal Income and Outlays, April 2010

Personal income increased $53.7 billion, or 0.4 percent ... Personal consumption expenditures (PCE) increased $24.4 billion, or 0.2 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in May, in contrast to a decrease of less than 0.1 percent in April
...
Personal saving as a percentage of disposable personal income was 4.0 percent in May, compared with 3.8 percent in April.

The following graph shows real Personal Consumption Expenditures (PCE) through May (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for large image.

The quarterly change in PCE is based on the change from the average in one quarter, compared to the average of the preceding quarter.

Even with no growth in June, PCE growth in Q2 would be 2.3% 2.5%. It looks like my earlier estimate of 3% PCE growth in Q2 will be about right.

The National Bureau of Economic Research (NBER) uses several measures to determine if the economy is in recession. One of the measures is real personal income less transfer payments (see NBER memo). This increased in May to $9,113.9 billion (SAAR) and is barely above the low of October 2009 ($8,987 billion).

This graph shows real personal income less transfer payments since 1969.

This measure of economic activity is moving sideways - similar to what happened following the 2001 recession.

This month income increased faster than spending ... meaning the saving rate increased.

This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the May Personal Income report. The saving rate increased to 4.0% in April (increased to 3.7% using a three month average).

I still expect the saving rate to rise over the next couple of years slowing the growth in PCE.

The increase in income was good news, but personal income less transfer payments are still only 1.4% above the low of last year.