U.S. personal income rises slightly below expectations in November, consumer spending likely rose in Q4

Personal income in the U.S. rose 0.3 percent in November, slightly below consensus expectations of a rise of 0.4 percent. Controlling for inflation and removing taxes, real disposable income rose slightly 0.1 percent sequentially. Meanwhile, personal spending rose 0.6 percent in nominal terms, ahead of expectations for a 0.5 percent print. In real terms, spending rose strongly by 0.4 percent after October’s flat reading.

Component wise, real spending on non-durable goods drove the rise, increasing 0.7 percent. However, services and durable goods have also had good months, registering a rise of 0.4 percent and 0.2 percent, respectively in the month.

Prices were up 0.2 percent sequentially in November, mainly because of a rise in energy costs with inflation accelerating to 1.8 percent year-on-year. Core prices rose weakly by 0.1 percent sequentially in the month, while it rose 1.5 percent year-on-year. The personal saving rate dropped to 2.9 percent from 3.2 percent in October.

Given the rise in November, consumer spending is likely to rise nearly 3 percent in the fourth quarter, stated TD Economics in a research report. Consumers have been an essential of economic activity and are expected to stay so in the next year. With tax cuts giving a raise to take home pay as soon as February and some nascent wage gains, household spending is expected to rise 2.5 percent on average in 2018.

This was the 67th month that core PCE inflation was lower than 2 percent and near-term momentum implies that it will continue to be there well into 2018, added TD Economics.

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