Personal income outpaces spending in December

WASHINGTON – Consumer spending nationwide in December rose $23.5 billion or 0.2 percent compared with the month before, slowing from November’s revised 1.0-percent gain. The monthly increase in personal consumption expenditures (PCE) was twice what analysts expected, based on the 0.1-percent median estimate from a Bloomberg News survey of 73 economists.
Personal spending adjusted for inflation (real PCE) shrank less than 0.1 percent last month, retreating from the previous month’s 0.4-percent gain. Purchases of durable goods and nondurable goods both fell 0.2 percent, while service purchases edged up 0.1 percent.
Meanwhile, U.S. personal income rose $55.1 billion or 0.5 percent compared with the month before, after rising 0.4 percent in November and 0.2 percent in October. Private wages and salaries rose $21.4 billion over the month, slowing from November’s $34.5 billion gain.
Disposable personal income rose $47.5 billion or 0.5 percent last month. But real disposable personal income, adjusted for inflation, increased 0.2 percent, erasing November’s 0.2-percent decline, the BEA said.
The nation’s personal savings rate was a positive $26.0 billion in December, up from a negative $1.8 billion the month before, as disposable income exceeded personal spending by 0.2 percent.
“With job growth slowing and gasoline prices remaining very high, consumer spending is likely to post very meager gains over the next couple of months,” Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, N.C., told Bloomberg News. The argument that the Fed is being too aggressive in lowering rates “is now off the table.”
Additional information, including the full Personal Income and Outlays report, is available from the U.S. Commerce Department’s Bureau of Economic Analysis at www.bea.gov.