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Economy in Brief

U.S. Personal Spending Declines as Income Growth Weakens in December
by Tom Moeller  January 28, 2022

• Outlays on goods decline as services spending slows.

• Core price inflation is steady & strong.

• Wage & salary growth firms.

Consumer spending & income were disappointing last month. Personal consumption expenditures during December fell 0.6% (+13.3% y/y) following a 0.4% November increase, revised from 0.6%. A 0.5% decline had been expected in the Action Economics Forecast Survey. Adjusted for price inflation, spending fell 1.0% last month (+7.1% y/y) after easing 0.2% in November.

Real spending on durable goods plummeted 4.9% in December (+4.6% y/y) after November's 1.7% decline. The decline was led by a 6.2% fall (+4.4% y/y) in real outlays on furniture & appliances, off for the third month in the last four. Motor vehicle & parts buying weakened 3.3% in real terms (-7.4% y/y), about as it did in November. Real purchases of recreational goods & vehicles weakened 4.9% (+14.7% y/y) after falling 1.2% in November. Real nondurable goods buying fell 2.1% (+7.8% y/y) after a 0.7% November easing. Real clothing outlays weakened 6.2% (+15.3% y/y) after a 2.2% decline. Food & beverage expenditures declined 1.3% (+4.6% y/y) after falling 0.8% in November but spending on gasoline & other energy products rose 0.8% (15.4% y/y), about as they did in November. Real outlays on services ticked 0.1% higher last month (7.5% y/y) after rising 0.2% in November. Real recreation services outlays surged 1.0% and by one-third y/y. The rise followed three consecutive months of strong increase. Real transportation outlays rose 1.5% (31.7% y/y) following a 0.5% rise. Real health care outlays improved a steady 0.6% in December (5.1% y/y) while housing & utilities spending weakened 0.2% (+0.6% y/y) after rising 0.4% in November. Real spending at hotels & restaurants eased 0.4% last month (+30.9% y/y) after a 0.2% November gain.

The PCE chain price index rose 0.4% last month (5.8% y/y) following two months of 0.6% gain. The price index excluding food and energy rose 0.5%, the same as in November. The 4.9% y/y increase was the strongest since September 1983. Durable goods prices rose 0.9% (10.5% y/y) owing to a second straight 1.8% surge (22.8% y/y) in motor vehicle prices. Home furnishings & appliance prices improved 1.0% (8.8% y/y) in December. Recreational goods & vehicle prices eased 0.6% (+1.3% y/y). Nondurable goods prices gained 0.3% (7.7% y/y) after two straight months of 1.2% increase. The services price index rose 0.4% (4.2% y/y) after a 0.5% gain. Gasoline prices eased 0.5% (+47.9% y/y). Energy prices overall eased 0.4% (+29.9% y/y) while food & beverage prices rose 0.3% (5.7% y/y).

Personal income rose 0.3% (7.3% y/y) in December after increasing 0.5% in November, revised from 0.4%. A 0.5% rise had been expected. Wages & salaries rose 0.7% last month (9.2% y/y) after a 0.6% rise while rental income rose 0.8% (7.5% y/y). Earnings on assets improved 0.6% ( 1.3% y/y) as dividend income increased 0.8% (-0.8% y/y) and interest income rose 0.5% (3.0% y/y). Proprietors earnings declined 1.4% (+13.5% y/y). Transfer payments were stable last month (6.5% y/y) following a 0.6% November gain. Disposable personal income increased 0.2% in December (5.6% y/y) after two months of stronger increase. Adjusted for price inflation, disposable income declined 0.2% (-0.2% y/y) for the third straight month.

The personal savings rate rose to 7.9% in December from 7.2% in November. It remained down from a high of 33.8% in April of last year. The level of personal savings rose 10.2% last month but has fallen 40.8% during the last twelve months.

The personal income and consumption figures are available in Haver's USECON database with detail in the USNA database. The Action Economics figures are in the AS1REPNA database.

Personal Income & Outlays (%) Dec Nov Oct Dec Y/Y 2021 2020 2019
Personal Income 0.3 0.5 0.6 7.3 7.3 6.5 4.1
  Wages & Salaries 0.7 0.6 1.0 9.2 9.1 1.3 4.8
Disposable Personal Income 0.2 0.4 0.5 5.6 6.1 7.5 3.8
Personal Consumption Expenditures -0.6 0.4 1.5 13.3 12.1 -2.6 3.7
Personal Saving Rate 7.9 7.2 7.1 14.0 (Dec. '20) 12.2 16.6 7.6
PCE Chain Price Index 0.4 0.6 0.6 5.8 3.9 1.2 1.5
  Less Food & Energy 0.5 0.5 0.4 4.9 3.3 1.4 1.7
Real Disposable Income -0.2 -0.2 -0.2 -0.2 2.2 6.2 2.3
Real Personal Consumption Expenditures -1.0 -0.2 0.9 7.1 7.9 -3.8 2.2
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