U.S. personal income and spending growth slowdown in December

U.S. personal income growth decelerated in December to 0.2 percent on a sequential basis from November’s 0.4 percent. Consensus expectations were for a rise of 0.3 percent. Real disposable income also recorded a deceleration. It shrank 0.1 percent in the month after rising 0.3 percent in the prior month.

Meanwhile spending rose 0.3 percent in the month, consistent with market expectations. Excluding price effects, real spending growth came in at 0.1 percent in December, a slowdown from November’s 0.3 percent, also consistent with market expectations. Durable goods spending growth recorded the biggest fall, declining to -0.3 percent in December from November’s 1.2 percent.

On the prices side, the PCE deflator rose 0.3 percent sequentially, as compared with market expectations of a rise of 0.2 percent. The increase was still present even when stripping out food and energy prices. The core PCE deflator rose 0.2 percent sequentially in December, up from 0.1 percent in November. On a year-on-year basis, core inflation came in at 1.6 percent in December.

“Today's release further supports the Fed's position to remain on the sidelines. Despite the loss in momentum, consumption is holding firm and inflation may be showing signs of life, although it is just one data point. If the data continue to trend in this fashion, the Fed may feel comfortable in leaving rates untouched through 2020”, said TD Economics in a research report.