a Drag on Consumer Incomes and Spending
- The PCE price index rose 0.6% in May, with core prices up 0.3%. Both overall and core PCE inflation remained well above the Federal Reserve’s 2% objective on a year-over-year basis.
- Nominal after-tax income rose 0.5% in May, but after adjusting for inflation after-tax income was down 0.1%.
- Nominal consumer spending rose 0.2%, with real spending down 0.4%. High inflation is weighing on households.
- The outlook for consumer spending has turned less positive, but it should continue to increase through the rest of this year and in 2023. Growth will shift from goods to services.
- The baseline outlook is for continued economic growth, but recession risks are elevated.
- Inflation remains high, but has likely peaked.