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Personal Income: Income and Core PCE Steady, Spending Revised Higher

January 29, 2018
Bottom Line: Personal income and disposable income rose modestly in December. November spending was revised even higher. The Q4 spending average was 3.8% annualized above its Q3 level. Core PCE, the Fed's preferred inflation metric, grew 0.18%, 1.9% annualized in the last 3 months and 1.5% over the last 12 months. Overall, while personal income growth is still well below the pace of 2014, the modest acceleration in the last year has been enough to spur a moderate acceleration in spending as the savings rate fell over the course of the year.

Personal Income ROSE by 0.4% in December, compared with market expectations for an increase of 0.3%. The prior month was revised lower from 0.33% to 0.30%. Personal Income is now 4.1% ABOVE its year ago level.

Wages and Salaries ROSE by 0.5%, Wages are now 4.9% ABOVE year ago levels. Personal Tax Payments ROSE by 0.5% and are now 5.8% ABOVE their year ago level, reflecting the year-on-year changes in employment and income.

Disposable Income ROSE by 0.3% and is now 3.9% ABOVE its year ago level.

Consumer Spending ROSE by 0.4%, compared with market expectations of an increase of 0.4% The prior month was revised higher. There were modest increases in durable goods, small decline in nondurable goods spending and modest increases in services spending. Spending is now 4.6% ABOVE its year ago level.

The Saving Rate FELL by 0.10 points to 2.4%.

The PCE Price Index ROSE by 0.1% and is now 1.7% ABOVE its year ago level. Meanwhile, the Core PCE Index ROSE by 0.2% and is now 1.5% ABOVE its year ago level.

Real Consumer Spending ROSE by 0.3% and is now 2.8% ABOVE its year ago level. The Q4 spending average was 3.8% annualized above its Q3 level.