Announced this morning, Personal Income increased 0.2% in December, as expected, and is lower than the previous month. Meanwhile, Personal Spending decreased -0.2% in December, slightly more negative than expected and Real Personal Spending which accounts for inflation decreased -0.3% in December also more negative than expected. The personal savings rate as a percentage of disposable income was 3.4% in December, which slightly more than last month.
Looking at inflation, the PCE Deflator grew 0.1% in December a bit more than expected and grew 5.0% on an annual basis. The Core PCE Deflator, which excludes food and energy prices, grew 0.3% in December which is slightly higher than the previous month and grew 4.4% on an annual basis as expected.
Overall, a mixed report with a slight increase in income and a decrease in spending in December; consumers seemed to slow down their spending toward the end of the year. Meanwhile, the inflation picture is also mixed with monthly figures for the core rate increasing slightly from the previous report, while annual figures show a decline. Coupled with this data with yesterday’s stronger than expected GDP report for the fourth quarter, the Federal Reserve should remain focused on keeping rates higher for longer to ensure inflationary measures move closer to their goals. And, with companies announcing some layoffs and muted guidance in their earnings reports, markets have a lot to digest on how a slowing consumer and Fed policy will affect markets in the coming weeks.
In all, the 10-year US Treasury yield is little changed and equity futures are mixed as we head into the market open.
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