US personal income falls 0.4% in May as government benefits decline

Personal income dropped 0.4% in May as government social benefit payments declined, the Bureau of Economic Analysis said Thursday, marking a notable pullback in household finances after recent gains.

The $109.6 billion decrease in personal income reflected reductions in Social Security payments and farm subsidies that outweighed gains in wages and salaries. Disposable personal income, which accounts for taxes, fell 0.6%.

Consumer spending also retreated, with personal consumption expenditures declining 0.1% or $29.3 billion. Americans cut back sharply on goods purchases, reducing spending by $49.2 billion, while increasing services spending by $19.9 billion.

The income decline was driven primarily by changes in government programs. Social Security payments fell due to adjustments related to the Social Security Fairness Act, while farm proprietors saw reduced income as Emergency Commodity Assistance Program payments from the American Relief Act followed their typical payment schedule.

Despite the spending pullback, the personal saving rate held steady at 4.5% in May, with Americans saving $1.01 trillion.

Inflation remained elevated, with the Federal Reserve’s preferred price gauge rising 0.2% for the month when excluding volatile food and energy costs. Over the past year, core prices have increased 2.7%, well above the Fed’s 2% target.

The broader price index, which includes food and energy, rose 0.1% in May and 2.3% annually.

Private sector wages provided some support to household incomes, with services industries adding $35.9 billion in wages and salaries while goods-producing sectors contributed $7.5 billion, according to Labor Department employment data.

The report showed consumers shifting spending patterns, moving away from goods purchases toward services as economic conditions evolved.

The Bureau of Economic Analysis will release June personal income and spending data on July 31. The agency also announced it will begin releasing results from its 2025 annual economic accounts update on Sept. 25, which will include revised statistics for gross domestic product and related measures.