U.S. Personal Spending Outpaces Income

Individuals extended the recent buying trend and dipped into savings last month. Personal consumption expenditures increased 0.4% (4.6% y/y) during December following a 0.8% November rise, revised from 0.6%. A 0.4% improvement had been expected in the Action Economics Forecast Survey. During all of last year, spending increased 4.5%, the strongest gain since 2011. Adjusted for price inflation, personal spending increased 0.3% (2.8% y/y) after a 0.5% gain. Real durable goods purchases strengthened 0.8% (7.3% y/y) after a 1.1% rise. Motor vehicle buying increased 1.0% (2.7% y/y) after a 1.3% decline. Real spending on home furnishings & appliances rose 0.9% (10.1% y/y) after three consecutive months of even stronger increase. Real spending on recreational goods & vehicles gained 0.3% (10.0% y/y) following a 3.5% jump. Constant dollar spending on nondurable items eased slightly (+3.3% y/y) after a 1.0% surge. Real purchases of clothing & footwear improved 0.3% (5.2% y/y) on the heels of a 2.9% increase. Spending on gasoline & oil declined 1.1% (-3.6% y/y) after a 0.1% slip. Real spending on food & beverages rose 0.4% (3.7% y/y) following a 0.9% jump. Real spending on services gained 0.3% (2.0% y/y), the same as in November. Real recreation spending increased 0.2% (1.5% y/y) after a 1.0% jump. Real health care outlays nudged 0.1% higher (2.5% y/y) following a 0.3% rise, while housing & utilities expenditures improved 0.5% (1.2% y/y), the strongest gain in nine months.

Personal income rose 0.4% (4.1% y/y) last month following an unrevised 0.3% November gain. A 0.3% rise had been expected. During all of last year income rose 3.1%. Wages & salaries rose 0.5% following a 0.4% increase. Growth from December-to-December rose to 4.9% from 0.8% in 2016. Rental income improved 0.4% (5.8% y/y) after a 0.5% rise. Proprietors' income eased 0.1% (+3.7% y/y) following a 0.9% jump. Interest income surged 1.2% (5.0% y/y) for the third consecutive month. Dividend income eased 0.1% (+2.7% y/y) following a 0.6% decline. Personal transfer receipts held steady (2.8% y/y) after a 0.4% decline. Social Security payments increased 0.5% (3.4% y/y) after a 0.8% decline. Medicare payments gained a steady 0.3% (2.9% y/y), but veterans benefits fell 0.6% (+5.9% y/). Unemployment insurance benefits rose 0.4% (-8.8% y/y) following a 1.1% increase.

Disposable income gained 0.3% (3.9% y/y) for the third straight month. Adjusted for price changes, take-home pay improved 0.2% after m/m stability. The December-to-December increase of 2.1% was improved from roughly no change during 2016.

The personal savings rate declined to 2.4%, the lowest level since September 2005. Personal saving declined by 20.6% y/y.

The PCE chain-type price index improved 0.1% (1.7% y/y) after a 0.2% rise. Excluding food & energy, prices rose 0.2% (1.5% y/y) following a 0.1% gain. Nondurable goods prices fell 0.2% (+1.4% y/y) with a 2.2% drop (+10.7% y/y) in gasoline & energy prices. That followed a 7.0% gain. Durable goods prices added to the decline with a 0.1% slip (-1.7% y/y) after a 0.2% drop. The price index for recreational goods & vehicles fell 0.6% (-3.0% y/y) while motor vehicle costs rose 0.7% (-0.3% y/y). Services prices improved 0.2% (2.3% y/y) for a second straight month.

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