Personal Income Up 0.4 Percent; Consumption Up 0.2 Percent; PCE Deflator Up 0.1 Percent

In December, personal income rose 0.4 percent. However, wages and salaries rose by a much lesser 0.1 percent, likely held back by continuing weak labor markets. Still, from a year prior, incomes were up 0.5 percent, which was the first year-over year rise since May 2009. Most of this increase over the past year though has been due to a 14.9 percent rise in transfer payments. Wages and salaries were still down 2.0 percent from a year prior.

Personal consumption rose 0.2 percent over the month, the third consecutive increase, though the smallest of them. From a year prior, consumption was up 4.0 percent. Consumers are again starting to increase their consumption at slower rates than their incomes. Therefore the savings rate increased in December to 4.8 percent from 4.5 percent in November. This is down from a recent high of 5.9 percent last May but this resumes a general trend upward over the past year and half.

Inflation as measured by the PCE deflator rose 0.1 percent over the month.
Therefore, real incomes rose by 0.3 percent and real consumption rose 0.1 percent. From a year prior, the PCE deflator rose 2.1 percent. As recently as September, the year-over-year change had been negative. Therefore, from a year prior, real income was down 1.7 percent while real consumption was 1.9 percent higher. The core PCE deflator, which excludes energy and food prices, rose 0.1 percent, and was 1.5 percent higher from a year prior.

m/m % change	Dec	Nov	Oct	Sep	Aug	Jul
Personal Consumption	0.2	0.7	0.6	-0.6	1.3	0.2
Real	0.1	0.4	0.3	-0.7	1.0	0.2
Personal Income	0.4	0.5	0.3	0.3	0.3	0.2
Real	0.3	0.2	0.0	0.2	0.0	0.2
PCE Deflator	0.1	0.3	0.3	0.1	0.3	0.0
Core PCE Deflator	0.1	0.0	0.2	0.1	0.1	0.1
Savings Rate (level)	4.8	4.5	4.6	4.8	3.9	4.8

10.02.01 (Source: Bureau of Economic Analysis)