Personal Spending And Income Rise

The consumer is solid though price pressures are still mostly dormant. Personal spending rose an as-expected 0.3 percent in November in data released last night by mistake. Income, data not released early, also rose 0.3 percent and the wages & salaries component is very strong for a second month, up 0.5 percent in November following a 0.6 percent gain in October.

Turning to inflation, core PCE prices rose only 0.1 percent in the month which was expected keeping the year-on-year rate, as it has been nearly all year, at plus 1.3 percent and showing no movement yet toward the Fed's 2 percent target. Total prices are unchanged though the year-on-year rate, getting a lift from an easy comparison with this time last year, is moving higher but from a very low level, up 2 tenths to plus 0.4 percent which is still the largest gain since December last year. The low rate of inflation in this reading shows the effect of oil prices.

The 0.3 percent gain for spending, though positive, doesn't quite offset October's no change reading (downwardly revised from plus 0.1 percent). The fourth-quarter spending data are running at an annualized rate of just 1.6 percent which doesn't point to outstanding fourth-quarter strength. But the holidays are still underway and last minute shopping could give a boost to fourth-quarter GDP. And the outlook for future spending does look positive with the savings rate, boosted by job availability and low gas prices, still very solid at 5.5 percent though down 1 tenth in the month.

The consumer is getting a boost on the income side but is still holding back a bit on the spending side. The spending data along with the inflation data in this report won't be raising expectations for Federal Reserve rate hikes.

Note that the Bureau of Economic Analysis mistakenly released the spending data of this report last night.

Recent History Of This Indicator:
The core PCE price index is the Fed's favorite inflation reading and Econoday expectations are not looking for much increase, calling for a 0.1 percent gain in November. Readings on personal income and personal spending are expected to rise but only modestly, at plus 0.2 percent for income, reflecting soft wage and workweek data in the November employment report, and at plus 0.3 percent for spending reflecting what is expected to be incremental gains for service spending and in line with a moderate gain for core retail sales in November.