Personal Income And Spending Increases

Personal income rose a moderate 0.3 percent in December with the wages & salaries component posting a slightly better gain at 0.4 percent. The savings rate, however, fell in the month, down 2 tenths to 5.4 percent which helped to fund a strong 0.5 percent gain in consumer spending. December's spending was centered in a 1.4 percent rise for durable goods, boosted specifically by autos, but included a 0.4 percent gain for services and a 0.2 percent for nondurable goods.

Inflation data look tame but nevertheless continue to trend higher. The core PCE (less food & energy) inched only 0.1 percent higher with the year-on-year at 1.7 percent which is unchanged from an upwardly revised November. Total PCE prices, boosted by a 1.7 percent monthly rise in energy, rose 0.2 percent. But this year-on-year rate, which is the most important barometer for price change in the economy, is up 2 tenths to 1.6 percent which is the highest since the oil collapse in 2014 (July 2014).

In sum, income is still moderate and spending is solid though may be getting funded from savings. And for inflation hawks, PCE prices are closing in steadily toward the Fed' 2 percent target.

Recent History Of This Indicator:
Strength in vehicle sales points to a jump in durable goods spending and in turn a strong gain for December consumer spending which forecasters see rising 0.5 percent. Personal income is expected to bounce back from a weak November with the consensus at plus 0.4 percent. PCE price indexes have been flat but year-on-year rates, boosted from easier comparisons, have been moving toward the Fed's 2 percent target. On a monthly basis, the PCE price index is seen rising 0.2 percent in December with the PCE core index also seen up 0.2 percent. Note the report will offer a December breakdown of consumer data previously released in the fourth-quarter GDP report.