Personal income rose +0.3% MoM and spending +0.4% MoM in December, while PCE inflation accelerated to +2.9% YoY, showing firmer price pressures late-year.

• Disposable income also increased +0.3% MoM, but employee compensation rose only +0.2% MoM, the weakest since June, indicating income growth relied partly on transfer receipts (about 45% of growth).

• Personal consumption outpaced income for the eighth consecutive month, pushing the savings rate down to 3.6% (lowest since 2022), showing continued drawdown of savings.

• Services spending rose +0.7% MoM while goods spending fell -0.1% MoM, meaning consumption growth remained concentrated in services.

• Real PCE increased only +0.1% MoM, while the PCE price index rose +0.4% MoM (core +0.4% MoM), indicating nominal spending gains were largely price-driven.

• Headline PCE inflation reached +2.9% YoY and core +3.0% YoY, the highest core reading since April 2024, showing an acceleration in annual inflation.

• Goods prices led inflation: durable goods +0.5% MoM and food +0.4% MoM; services prices rose +0.3% MoM, suggesting broader price pressures beyond services.

Personal income rose +0.3% MoM in November after +0.1% in October, while PCE increased +0.5% MoM in both months, showing spending continued to run ahead of income growth.

• Personal income increased $30.6B (+0.1% MoM) in October and $80.0B (+0.3% MoM) in November, with November’s larger gain indicating firmer month-to-month income momentum.

• Disposable personal income (DPI) rose $12.0B (+0.1% MoM) in October and $63.7B (+0.3% MoM) in November, matching the income pattern and providing only modest support for spending growth.

• Personal consumption expenditures (PCE) increased $98.6B (+0.5% MoM) in October and $108.7B (+0.5% MoM) in November, keeping consumption growth steady across both months.

• Personal outlays rose $97.8B in October and $107.9B in November, consistent with solid overall spending flows beyond consumption alone.

• Personal saving fell from $843.9B in October to $799.7B in November, and the saving rate edged down to 3.5% from 3.7%, indicating a slightly smaller buffer relative to DPI.

• The October income gain was driven mainly by higher compensation and government social benefits, partly offset by declines in other current transfer receipts from business, farm proprietors’ income, and personal dividend income.

• The November income gain primarily reflected higher compensation and stronger personal dividend income, shifting the composition away from social benefits versus October.

• The PCE price index increased +0.2% MoM in both October and November, while YoY PCE inflation rose +2.7% in October and +2.8% in November (joint largest since March 2024); core PCE inflation (ex food and energy) also rose +0.2% MoM in both months and accelerated from +2.7% YoY to +2.8% YoY.

Personal income rose +0.4% MoM (vs +0.3% MoM expected) in September, while disposable income increased +0.3% MoM and PCE grew +0.3% MoM (vs +0.3% MoM expected), reflecting steady nominal income gains alongside moderate spending momentum.

• Current dollar income increased by $94.5 billion, driven primarily by compensation and asset income, with private wages up $41.2 billion and dividend income rising $19.8 billion.

• Disposable personal income increased $75.9 billion (+0.3% MoM), while real disposable income grew +0.1% MoM, indicating softer inflation adjusted income growth.

• Personal consumption expenditures rose $65.1 billion (+0.3% MoM), with services accounting for nearly all of the gain (+$63.0 billion) and goods contributing a modest +$2.1 billion.

• Real PCE was flat (0.0% MoM), suggesting that the increase in nominal spending was fully offset by price growth.

• Half of the growth in consumer spending in September is attributed to gas & other energy goods (+$17.2 bil) and housing & utilities (+$15.4 bil).

• PCE prices increased 0.3% MoM (vs 0.3% MoM expected) and 2.8% YoY in September, up from 2.7% YoY in August. Core PCE prices edged up 0.2% MoM (vs 0.2% MoM expected), and the annual rate eased -0.1 ppt to 2.8% YoY (vs 2.9% YoY expected).

• The personal saving rate held at 4.7%, with total saving at $1.09 trillion, showing limited change in household financial cushions.

• Compensation growth broadened across categories: services wages rose $32.3 billion, goods producing wages rose $8.9 billion, and government wages increased $7.1 billion, while supplements added another $10.7 billion.

• Spending gains were widely distributed across both goods and services categories, with notable increases in food services and accommodations, health care, and recreation services, consistent with broad based consumer activity.

Personal Income

Growth in income in August continued the solid pace that we have seen earlier in the summer. Personal income increased 0.4% MoM in August, matching the pace seen in July and slightly ahead of the June increase. The increase in headline income led to a similar 0.4% MoM increase in disposable income. Both rates were in line with what analysts expected and the strongest monthly gains since April. When adjusted for inflation, income gains look a bit tamer with real disposable income growth at just 0.1% MoM.

In August, income growth was driven by two main factors:

• Employee compensation continued to increase at a decent clip, rising 0.3% MoM, supported by similar gains in wages & salaries and supplements to wages & salaries. Details point to wage gains coming almost entirely from the service sector which accounted for $28.8 billion of the increase, while the goods sector actually saw wages drop -$0.1 billion. The manufacturing industry in particular was the largest drag on wage growth, with a decline of -$2.1 billion.
• Personal current transfer receipts were the other force pushing incomes higher, with an increase of 0.6% MoM. The rise was caused by an increase in Medicare (+$10.7 billion), Medicaid (+$5.0 billion), and Social Security (+$4.8 billion) benefits, and a large $12.9 billion influx that came from a settlement with a domestic health insurance provider.

Since current transfer receipts played a significant role in boosting incomes in August, the solid rise is actually a bit misleading. When excluding transfer receipts from real personal income, there was basically no growth on a monthly basis, significantly slower than the 0.3% MoM increase in July but better than the negative prints in May and June. After the tepid reading in August, real income (ex transfer receipts) is up 1.4% YoY, down slightly from 1.5% YoY in July but significantly slower than the 2.4% YoY increase seen a year ago. Thus, the medium-trend points to a gradual slowdown in non-transfer receipt income adjusted for inflation.

Personal Spending

For the fourth consecutive month, personal consumption expenditures (PCE) growth outpaced the gains in disposable income. In August, PCE was up 0.6% MoM, slightly ahead of expectations and the strongest increase since March of this year. Spending increased in both goods and services categories, with the former up 0.8% MoM and the latter up 0.5% MoM. Both categories of spending have been strong over the summer, suggesting the consumer has been stable enough to make purchases even though prices continue to rise. Indeed, even when adjusted for inflation, consumption growth was still a solid 0.4% MoM in August.

Within the segments of consumer spending, we see a lot of the increase driven by discretionary categories. The categories that especially stick out are food services & accommodations (+$13.0 billion), recreational goods & vehicles (+$11.1 billion), and recreation services (+$9.9 billion). It is also notable to point out that these weren’t the only categories that saw increases; spending in every goods and services category grew. When consumers are spending more on everything, especially discretionary goods, it is usually a signal that they feel pretty confident in their financial situations.

However, it is unclear how much longer this trend can continue. As mentioned before, income growth is slowly but consistently fading away and not keeping pace with consumption growth which is putting most consumers’ finances in the red. Monthly personal savings were negative for the fourth straight month, and over that time period, consumers have drained over $250 billion from stored savings (or they are increasing debt loads). This trend isn’t necessarily new, but the last few months of negative savings have been particularly high, making the magnitude of the decline unusually high (of course that was offset by a strong $150.7 billion increase in savings in April).

PCE Inflation

The PCE inflation figures for August were unsurprising as both the monthly and annual rates were in line with expectations. The headline PCE index increased 0.3% MoM and 2.7% YoY, up slightly from 2.6% YoY in July. Both rates were on the hotter side relative to data this year. The MoM increase was the strongest since February, and the annual rate was the strongest since April. This was caused by strong gains in the food and energy indexes, which were up 0.5% MoM and 0.8% MoM, respectively. Notably, food inflation has been on a consistent rise throughout the year and is now at 2.2% YoY, the highest since October 2023.

The Fed’s preferred inflation gauge, core PCE inflation, also saw a moderate rise of 0.2% MoM, but it wasn’t enough to move the annual rate above 2.9% YoY. Both readings were in line with expectations. The services segment was the main driver of price growth in August, rising 0.3% MoM, while goods prices were more contained at 0.1% MoM, thanks to a second straight -0.1% MoM decline in durable goods prices. Unlike the CPI report, we are not seeing as strong of an upward push from goods inflationary pressure in the PCE price data in the short-term. Instead, it is a bump up in short-term services inflation that is keeping core PCE inflation sticky (see chart on the right).

Personal income increased 0.4% MoM (vs 0.4% MoM expected) in July, with disposable personal income up 0.4% MoM as well.

• Personal consumption was up 0.5% MoM (vs 0.5% MoM expected), driven by higher spending on autos and financial services.
• Real PCE rose +0.3% MoM, with services spending up +$60.2 billion and goods spending up +$48.7 billion.
• In July, personal income growth was driven by higher wages and salaries (+0.6% MoM) and non-wage supplements to income (+0.5% MoM).
• Personal transfer receipts were flat on the month, and personal income from assets was only up 0.1% MoM.
• The personal saving rate fell to 4.4% in July, down from prior levels, with total personal saving at $985.6 billion.

• The PCE price index increased 0.2% MoM (vs 0.2% MoM expected) and remained up 2.6% YoY (vs 2.6% YoY expected) in July.

• Core PCE inflation was 0.3% MoM and 2.9% YoY, both in line with expectations. The annual rate ticked up 0.1 ppts from June and was the highest since March.