U.S. personal income remained unchanged in November, income growth likely to rebound in coming months

U.S. personal income stayed the same in November, coming in below the consumption expectations. Personal income came in at 0 percent, as compared with expectations of a 0.3 percent gain. Stripping inflation and taxes, real disposable income dropped 0.1 percent in sequential terms. But this didn’t stop Americans from spending.

Personal consumption was up 0.2 percent in nominal terms, slightly below the consensus expectations. In real terms, spending was up a bit 0.1 percent after rising 0.1 percent in October. Real spending on durable goods dropped slightly, following two very strong months of growth. The combination of higher spending and flat income saw the savings rate decline to 5.5 percent. The personal savings rate has been trending down through 2016, after rising in the last year.

Inflation, gauged b the year-on-year change in the personal consumption deflator, stayed unchanged at 1.4 percent. Core PCE inflation came in at 1.6 percent, below the central bank’s target rate of 2 percent.

The third quarter consumer spending data was upwardly revised to 3 percent, while November’s spending result was in line with slightly stronger consumer spending growth in the fourth quarter as compared to what was anticipated earlier, said TD Economics in a research report.

“We expect income growth to pick up in the months ahead reflecting robust wage and employment gains, providing a solid foundation for consumer spending. We expect inflation to pick up, but the Fed can certainly afford to maintain a very gradual pace for rate hikes in 2017”, added TD Economics.