Personal income in the U.S. slumped by more than expected in the month of June, according to a report released by the Commerce Department on Friday, although the report also showed another substantial increase in personal spending.
The Commerce Department said personal income tumbled by 1.1 percent in June after plunging by a downwardly revised 4.4 percent in May.
Economists had expected personal income to decrease by 0.5 percent compared to the 4.2 percent nosedive originally reported for the previous month.
The bigger than expected drop in personal income reflected a decrease in government social benefit payments made to individuals from federal economic recovery programs in response to the COVID-19 pandemic
Disposable personal income, or personal income less personal current taxes, also slumped by 1.4 percent in June after plummeting by 5.1 percent in May.
Meanwhile, the report said personal spending surged up by 5.6 percent in June after skyrocketing by an upwardly revised 8.5 percent in May.
Personal spending had been expected to jump by 5.5 percent compared to the 8.2 percent spike originally reported for the previous month.
Excluding price changes, personal spending shot up by 5.2 percent in June after soaring by 8.4 percent in May.
“While consumers felt more at ease spending in June, real-time data point to plateauing demand since early July,” said Gregory Daco, Chief U.S. Economist at Oxford Economics.
He added, “Moreover, with the health situation deteriorating, fiscal aid running dry, employment cooling and confidence ebbing, the risks are skewed to the downside.”
With income falling and spending spiking, personal saving as a percentage of disposable personal income dropped to 19.0 percent in June from 24.2 percent in May.
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