Economists missed the boat by a mile on income and expenditures.
The BEA’s Personal Income and Outlays report for May 2025 was much weaker than economist’s consensus expected. Spending was a bit higher than I expected.
To arrive at real numbers, subtract the PCE price index from income and PCE. Rounding explains differences.
I calculate the PCE Price Index M/M as 0.135 percent, a bit higher than the BEA’s rounded number. I calculate Personal Income M/M as -0.426 percent, and PCE as -0.141 percent.
Thus, the BEA rounded the price index lower, income and spending higher.
On average, rounding errors wash out. But the combination this month overstates the weak nature of the headline numbers.
Personal Income and Outlays Key Points
- Personal income decreased $109.6 billion (0.4 percent at a monthly rate) in May.
- Disposable personal income (DPI)—personal income less personal current taxes—decreased $125.0 billion (0.6 percent).
- Personal consumption expenditures (PCE) decreased $29.3 billion (0.1 percent).
- The $29.3 billion decrease in current-dollar PCE in May reflected a decrease of $49.2 billion in spending on goods was partly offset by an increase of $19.9 billion in spending for services.
- The sum of PCE, personal interest payments, and personal current transfer payments—decreased $27.6 billion in May.
- Personal saving was $1.01 trillion in May and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.5 percent.
PCE Price Index Key Points
- From the preceding month, the PCE price index for May increased 0.1 percent.
- Excluding food and energy, the core PCE price index increased 0.2 percent.
Real Personal Income
Personal Current Transfer Payments (PCTR) are government payments for which no current services were performed. PCTR included Medicare, Medicaid, SNAP (food stamps), Social Security, and subsidized housing.
I will dive further into PCTR later today, but Social Security was down 7.3 percent accounting for most of the decline in income.
Social Security payments were not down in May; they were simply distributed later in the month than usual due to the Social Security Administration (SSA)’s payment schedule. Specifically, the second Wednesday of May, which is the payment date for those with birthdays between the 1st and 10th, fell on May 14th, making it the latest possible date for the first round of payments in any month.
The NBER, the official arbiter of recessions, follows Real Personal Income Excluding Transfers.
Real PI minus PCTR was down 0.133 percent by my calculation. That’s the important number.
The three free money massive spikes in income in the above chart are what fueled inflation during and following the Covid pandemic.
Dips in Real Personal Income are very recessionary.
Related Posts
June 26, 2025: Trade Deficit Increases as Imports Decline 0.75% and Exports Decline 5.9%
Welcome to another nasty set of trade data numbers.
June 26, 2025: Unexpected Huge Negative Revisions to First-Quarter GDP and What it Means
The BEA revised GDP lower by 0.3 percentage points. The details are worse.
I will comment on GDPNow next. It did much better than I expected because its model expected the actual data better than the economists.
Trying to guess what the GDPNow model has priced in is not an easy task.
The price indexes are up. Will the FED doves still consider a rate cut in July?
Not likely with fuel and energy falling.
With all the hysteria over tariffs, how in the world was this data unexpected?
Who is being surveyed? Preschoolers?
Social Security is in the Tuesdays With Morrie mode.
Car repo companies are expecting a huge increase in car repossessions later this year and next.
The low number of home purchases ripple through to retail items that are purchase along with moving into a home.
Well, since the dollar is sinking, many people’s travel plans are getting tanked this summer.
15% drop against the Euro this year will do it.
And against the ISK (where I’m going in Oct.)
Don’t have to pay the hotel reservations until 09/30….but the way the dollar is falling, maybe we should pay now!
NVDA reached $4T. Deepseek and AMD cannibalized NVDA. Those who bought at the lows might sell today. They will not spend a dime. The upper 1% are more frugal than the bottom 20%. They park in gov bills, waiting for the plunge ==> a smaller gov, tariffs, payroll taxes and corp taxes are rising. They filled gov coffer. Trump isn’t a regime change king. He doesn’t want to humiliate Iran militarily. The Ayatollah: we won. We slapped the great Satan. If Iran will negotiate with the US, after beating the great Satan ==> It will be a systemic change.
Garnishing the wages of millions of delinquent student loan borrowers is going to further decease spending.
Since I plan on retiring and moving overseas next year, I’ve stopped most consumption except for the basic stuff: food, utilities, and entertainment. Won’t buy anything that won’t fit in a suitcase so no point.
I am seeing many more people express interest in what I’m doing, some people are finally starting to awaken to the demographic realities of what lies ahead.
Interesting. So where is a safe place to retire?
Always looking for ideas
That all depends on you and your capabilities+preferences. The only thing I will advise is you become a tax resident in most countries after 183 days so keep that in mind.
Type “expat” in YouTube to see the many stories of people that have left for a new life. Also look for Nomad Capitalist for ideas.
Unless you relinquish your US citizenship, you still have to file US tax returns every year. You may or may not be able to offset US income taxes with foreign taxes. My sister relinquished hers for that reason, but she is never coming back to live here, no way no how, so it made sense for her.
Can’t escape it.
I wouldn’t buy anything that won’t fit my yacht.
I wouldn’t buy anything that won’t fit in Venice.
I would suggest New Zealand.
They have skills based immigration and tight policies. Foreigners can not buy waterfront property though, so that’s a drag.
Napier on the north island is really nice and has Cape Kidnappers golf course. Most players arrive by helicopter.
>
Hard pass on NZ after seeing its covidcon tyranny.
They’re as bad as Australia with the COVID tyranny and gun control. No thanks.
Who cares about a one off event? Australia had way too many speed cameras for me 100 kph speed limits. NZ remains my pick and yes I have been to many many countries and New Zealand a few times.
You guys really gotta get out more!
Japan is exceptional but I can’t get a solid grip on the language! and the tectonic risk is almost as high as NZ.
I’ve been to New Zealand, there are many pros but a huge con is that it’s an isolated island and almost everything has to be imported. Population is too small and flights in and out take 8+ hours to get anywhere.
But like I said, it all depends on what you’re looking for and I want a large youngish population that can provide all the goods and services I want at a low reasonable cost. SE Asia is amazing in that capacity but there are other places too.
They’re not interested in older immigrants, unless you’re rich.
Correct, unless you can pay for it!
Otherwise, their healthcare system is fantastic.
Worried about getting deported?
No, I don’t want to live in a country full of boomers. That should be obvious to you by now.
Well, that eliminates Europe & Japan.
I guess I should have said American boomers. Lol.
And China.
Since you are destitute losing you would be a net gain for the country.
I’d rather be destitute than a double dipping decrypt socialist. You collecting social security and medicare from American taxpayers then get on the socialism dole in France and rip the French off.
No wonder you’re so angry and bitter at yourself, you can’t stand to see your face in the mirror each morning can you?
Where To?
Gary Brode loves Portugal
I understand it is a top destination.
John Mauldin likes Puerto Rico
I actually plan on being mobile due to tax residency pitfalls. I will spend most of my time in SE Asia and the other in Europe with occasional visits to South America. Americans get 90 day visa free travel to most places.
Portugal recently changed their tax free visa but still a good choice. I have been.
I will probably buy some condos, one for each region and use as my base of operations when in region. I like to travel which reminds me I’ll be sailing for the month of July and maybe August so I won’t be around after next week.
Have a happy and safe summer.
Go to Turkey. Lot’s of RE bargains on the Black Sea.
I’ve heard that Croatia is nice on the coast. Like Greece, but cheaper.
The spread between PCTR and Rent/ OER is shrinking. When co shut unprofitable store they move employees to existing store. It reduces working hours/ week. That’s why the real disposable income is down, without a spike in unemployment.
My birthday is on the 8th. I got my SS on May 2nd.
Supposedly about 1 million illegals self-deported since Trump took office. This along with future outflows of illegals will impact the macro numbers if the migration is large enough. When they were flowing in, this juiced Biden’s GDP numbers.
I think we will have to wait a long while until the per capita numbers come out.
Good point.
If 1 million people self-deported states (and Trump) would be bragging about surplus funds in their coffers because the narrative here is these people were draining government budgets. Additionally, if 1 million people self-deported then the JOLTS would have surged because the narrative here was that they were “stealing” everyone’s job.
I have seen no report about surges in budget surplus nor an uptick in job openings so I think it’s a myth. I prefer data and math to “gut feelings, conspiracy theories, and opinions” for that reason.
What has happened is ICE has deported 200,000 people at a cost of $8 billion. The cold hard numbers don’t lie.
CSPAN never ran a superstate. Treating the illegal with an iron fist, especially in dems states, is Biden/Harris inverse. Trump deflates 20 millions illegal immigrants wages, and voting power, stealing American citizens votes in dems states. Deporting the illegal is a national glue that unites red and blue. A creed ! If 1M elderly like u self deport their SS, ex states SNAP and other states gov goodies, will deflate in real terms.
Why in the world a gypsy like u wants to leave a rising power.
Where did you get that 1 million number?
Google it yourself.
Feels like everyone knows that something is gonna happen but nobody knows how to prepare.
As long as some dipshit doesn’t start a war everything will be… oh wait.
But I told you what to Sunday Night right here on mishtalk. See:
Derivatives Suggest $80 WTI Oil when Futures Open, then What?
Here is what I told you:
“Oil will drop from the opening print and equity markets will rally because the Iran problem is nearly solved. Good job Mr. Trump. The man is amazing!
If Kamala was in office, Iran would get the Nuclear bomb before the end of the year. America dodged a bullet”
This was all obvious, but your politics got in the way. You all downvoted me. Hope you were not long oil and short SPs
Great call.
Equity has not been what I would call stable this year. Also I bet you thought Iraq had wmds too. Here’s a real hoot: we’re now offering Iran a BETTER nuclear deal than Obama
https://edition.cnn.com/2025/06/26/politics/us-iran-talks-nuclear-program
More money for Iran! Good job Mr Trump! Truly a master of the deal lol
You got lucky vs what I said.
The strike was Sunday so you look brilliant
I said the rise would not stick.
For 30 years, I was a wall street trader. I know how to play MidEast wars.
If you want to leave the US, get a passport. If you want to stay in the US, get a passport.