U.S. personal income rises above expectations in December

U.S. personal income rose in the month of December, coming in above consensus expectations. Personal income rose 0.4 percent, as compared with expectations of a rise of 0.3 percent. Real disposable income was up 0.2 percent sequentially after a flat reading in November.

Meanwhile, personal spending ended last year on a strong note, rising 0.4 percent in nominal terms. Spending, in real terms, rose 0.3 percent, after an upwardly revised 0.8 percent print seen in November.

Component wise, real spending on durable goods led the way, rising 0.8 percent. Services rose 0.3 percent, while non-durable goods spending came in flat after a 1 percent rise in November. Prices were up 0.1 percent sequentially, as energy prices dropped 1.2 percent. Therefore, headline inflation edged down to 1.7 percent year-on-year from 1.8 percent. Core prices strengthened, coming in at 0.2 percent, leaving core inflation unchanged at 1.5 percent year-on-year.

The personal saving rate dropped to 2.4 percent from a downwardly revised print of 2.5 percent in November. The saving rate, while prone to revision, has just been lower in 2005, when it reached 1.9 percent.

Personal spending ended 2017 on a solid note as the after effects of hurricanes aided in raising durable goods spending. While encouraging to see such a solid end to the year, spending growth has slowed markedly at the beginning of the calendar year over the past two years, noted TD Economics in a research report.

“It remains to be seen whether this trend will continue in 2018, but there are mitigating factors that suggest it may not. The Fed is likely to remain on hold at this meeting, but a rate hike is likely coming in March at the first meeting Chaired by Jerome Powell”, added TD Economics.

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