The personal income report beat estimates with a surprisingly firm 0.6% December income rise and only a tiny -0.2% drop in consumption spending, alongside a -0.6% spending drop on a “real” basis. We saw downward revisions in prior Q4 income and consumption figures prior to the strong close to Q4, leaving averages in line with yesterday’s GDP report, but a stronger than expected entry into Q1.
The savings rate rose to 13.7% in December from a 12.9% trough in November, with now revisions. We saw a December income boost from the Christmas stimulus package even though we thought it might miss the month, given a 2.3% pop in personal current transfer receipts with strength in unemployment insurance and the “other” component.
For some income specifics, compensation rose 0.5% after 0.4% previously, with wage and salary income also increasing 0.5% from 0.4%. Disposable income bounced 0.6% after a -1.5% (was -1.2%) November dive.
For the price measures, the PCE chain price index rose 0.4% in December, versus unchanged in November. The core price measure was up 0.3%, versus unchanged. On a 12-month basis the headline PCE accelerated to a 1.3% y/y pace from 1.1% y/y previously, while the core rate rose to 1.5% y/y, versus 1.4% y/y.
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Today’s figures add upside risk to our Q1 GDP growth estimate of 3.2%, given the firm Q4 close for income and consumption.