Personal Saving Rate Drops to Lowest Rate Since November 2022

Personal income inched up 0.2% in June, down from a 0.4% increase in the prior month, according to the most recent data release from the Bureau of Economic Analysis (BEA). Gains in personal income are largely driven by increases in wages and salaries. As spending outpaced personal income growth, the personal savings rate decreased to 3.4%. This reading is less than half of the 7.4% average rate seen in 2019 before the COVID-19 pandemic. As inflation has mostly eliminated real compensation gains, consumers are dipping into savings to support spending. This will ultimately lead to a slowing of consumer spending.

Real disposable income, income remaining after adjusted for taxes and inflation, edged up 0.1% in June, down from an increase of 0.3% in May. On a year-over-year basis, real (inflation adjusted) disposable income rose 1%. The pace of real personal income growth slowed after reaching 5.3% year-over-year gain in June of 2023.  

Personal consumption expenditures rose 0.3% in June after a 0.4% increase in May. Real spending, adjusted to remove inflation, increased 0.2% in June, with spending on goods rising 0.1% and spending on services up 0.4%.