Everyday Economics: The consumer is still spending, but not out of the woods

Last month, inflation was still too high but some households got a little breathing room.

In May 2026, the Federal Reserve’s preferred inflation gauge, the PCE price index, was 4.1% higher than a year earlier – still more than double the Fed’s 2% target. But the income side of the report looked better. Inflation-adjusted disposable personal income rose 0.3 percent in May, after three consecutive monthly declines.

That sounds encouraging. Real income is what gives consumers room to spend. When purchasing power improves, households can buy more without relying as much on credit, savings, or delayed bill payments.

But May’s income gain was not as strong as it looked.

Part of the increase came from labor income, which is good news. Private wages and salaries rose in May, consistent with a labor market that has not rolled over. But a large part of the rebound also came from a jump in farm proprietors’ income, boosted by disaster-relief payments to producers. That support is less likely to repeat in the months ...