New data from the US Bureau of Economic Analysis showed that headline PCE inflation rose 4.1% year over year in May 2026, up from 3.8% in April and the highest reading since April 2023. The personal consumption expenditures price index is the inflation gauge most closely watched by the Federal Reserve, and the latest report showed price pressures remained elevated. Core PCE, which strips out food and energy, also moved higher to 3.4% from 3.3%, marking its highest level since October 2023.
Annual inflation accelerated even as monthly readings met expectations
On a monthly basis, headline PCE increased 0.4% in May, in line with expectations. Core PCE rose 0.3%, also matching forecasts. The bigger development was the pickup in annual inflation. Even after removing food and energy, core inflation continued to edge up, showing that pricing pressure was not limited to a narrow set of categories.
The BEA report also pointed to firm demand. Personal consumption expenditures increased by $156.1 billion in May, with monthly growth of 0.7%, above the market expectation of 0.5%. Services spending rose by $94.3 billion, while goods spending increased by $61.8 billion. After adjusting for inflation, real PCE still posted a 0.3% monthly gain. Consumer demand held up.
Income growth was boosted by wages and disaster relief payments
Personal income rose 0.7% in May, stronger than the expected 0.4%, after a revised -0.1% reading in April. According to the BEA, the increase was driven by higher compensation and by the second round of disaster relief payments under the American Relief Act of 2025, which lifted income for farm proprietors.
At the same time, household savings came under pressure. The report said personal saving totaled $704.2 billion in May, and the personal saving rate fell to 3.0% of disposable income. Spending remained firm even with prices running high, but the lower saving rate showed that households were using more of their income and savings to sustain consumption.
From April to May, several key indicators turned hotter together
BEA data showed a broad shift between April and May. Personal income moved from -0.1% to +0.7%, and personal spending accelerated from +0.4% to +0.7%. Headline PCE held at 0.4% month over month, while core PCE stayed at 0.3%. Monthly inflation did not accelerate beyond April, but the annual numbers moved higher, and the combination of stronger income and stronger spending left May with a clear picture of firm demand and persistent inflation pressure in the US economy.
The original report was released on June 25, 2026, Taipei time. Based on the May figures alone, inflation, income, and spending all remained strong at the same time.