Personal income increased by 0.3% in September, following a 0.2% up in August and a 0.3% increase in July, according to the most recent data release from the Bureau of Economic Analysis. The gains in personal income were largely driven by increases in wages, salaries, and personal current transfer receipts. However, the pace of personal income growth slowed from a peak monthly gain of 1.4% seen in January 2024.

Real disposable income, income remaining after adjusted for taxes and inflation, inched up 0.1% in September. On a year-over-year basis, real (inflation adjusted) disposable income rose 3.1%. The pace of real personal income growth softened from a 6.5% year-over-year peak in June 2023.

Personal consumption expenditures  rose 0.5% in September after a 0.3% increase in August. Real spending, adjusted to remove inflation, increased 0.4% in September, with spending on goods and services each climbing 0.5%.

While spending increased more than personal income, the personal savings rate dipped to 4.6% in September, down from 4.8% in August and 4.9% in July. As inflation has almost eliminated compensation gains, people are dipping into savings to support spending. This will ultimately lead to a slowing of consumer spending.