**MNI DATA IMPACT:US May Core PCE Prices +0.2%; Y/Y +1.6%>

By Kevin Kastner

     WASHINGTON (MNI) - The core PCE price index came in as expected 

with a 0.2% increase in May, right on the Bloomberg and MNI surveys, 

data released Friday by the Commerce Department showed. 

     The expected gain kept the year/year rate at 1.6%, still down from 

earlier in the year and well below the Federal Reserve's 2% target. 

     Here are some of the key factors from the data release on Friday: 

     - Personal income was up 0.5% in May, ahead of the 0.3% gain 

expected by both the Bloomberg consensus and the MNI survey. Wages and 

salaries were up only 0.2% in May, the smallest gain since November. An 

MNI preview had noted that the smaller payrolls gains in the month 

should restrain wage growth. 

     - Making up for the smaller wage gain was strong income growth from 

proprietors' income and continued solid gains from return on assets 

transfer receipts. 

     - Current dollar PCE was up 0.4% in April, compared with 

expectations for a 0.3% gain by MNI and a 0.5% gain by the Bloomberg 

survey. This followed an upward revision to the April data. The increase 

was the result of a 1.7% surge in durable goods spending, offset by 

slower nondurable goods spending. Services spending was up modestly. 

     - Real PCE posted a 0.2% increase in May after an upward revised 

0.2% increase in April. Real durables PCE was up 1.6%, but real 

nondurables fell 0.2% in the month. Real services spending was up 0.2%. 

The second quarter rate, through two months, is running 3.4% SAAR ahead 

of the first quarter. Real PCE was up 0.9% in the first quarter. 

     - The overall PCE price index was up 0.2% in May after a 0.3% 

increase in April. The year/year rate was 1.5%, a slowdown from the 1.6% 

rate in April. 

     ** MNI Washington Bureau: 202-371-2121 ** 

[TOPICS: MAUDS$,M$U$$$,MAUDR$]