Announced this morning, Personal Income decreased -2.0% in May, a bit less negative than expected. Personal Spending was flat in May, which was less than expected. The PCE Deflator, increased 0.4% in May and has increased 3.9% on an annual basis. The Core PCE Deflator, which excludes food and energy prices, increased 0.5% in May and grew 3.4% on an annual basis. Overall, muted data points on income and spending, which still reflect comparisons to previous months that included stimulus payments. Inflation measures remain elevated, including the core PCE Deflator at 3.4%, which is higher than the Federal Reserve’s average target of 2% for the second month in a row. The balance between increased high-frequency activity, such as dining out, flying, and staying in hotels, and more structural issues, such as higher wages and supply chain constraints, will need to be closely watched in the months ahead to see if inflationary pressures remain transitory or if they will persist. In all, bond yields ticked slightly lower following the release of the data, and equity futures are higher as we head into the market open.
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