May personal income: Saving rate stabilizes

Research evidence excerpt

May personal income: Saving rate stabilizes

Barclays | US Economics

Headline estimates place spending on a somewhat more sustainable trajectory relative to

income...but idiosyncrasies exaggerate the improvement. Personal income posted an

unexpectedly strong 0.7% m/m increase in May (Barclays 0.3% m/m, consensus 0.4% m/m)

following April's flat reading. Disposable income was also up 0.7% m/m on the heels of a 0.1%

m/m decline in April. With the latest estimates, the saving rate appears to have stabilized at

3.0% in April and May, compared with a recent peak of 4.4% in January, when tax withholdings

were adjusted downward to reflect lower tax rates under the OBBBA.

Both personal and disposable have followed uneven growth trajectories in recent months, party

reflecting swings in farm proprietors' income from various payments for crop and livestock

losses under the American Relief Act of 2025, which surged in both March and April. This should

not be regarded as an ongoing source of income support, with payments under this program

(which are tied to losses in 2023-24) at their tail end. Labor compensation, which is often a more

reliable signal of underlying consumer spending fundamentals, has been comparatively smooth

( Figure 3). Seen through this lens, purchasing power fundamentals in recent months look quite

challenging, albeit falling energy prices seem poised to provide some relief in the coming

months.

Although consumer spending is still poised to reaccelerate in Q2 following Q1's soft patch,

we think that the slowing underlying trajectory of labor market income is likely to weigh

on growth in H2 2026. Our official outlook calls for quarterly increases of 1.5% q/q saar

during H2 2026—broadly consistent with our assessment of potential GDP growth. Given