Personal income dropped less than market expectations in December, while personal spending was slashed more than expected, according to a report released by the U.S. Department of Commerce on Wednesday morning. The report also showed core inflation remained flat over the month.
Total personal spending, which comprises roughly 70% of U.S. gross domestic product, fell 1.0% in the month, following a cutback of 0.8% in November. Annually, spending has fallen 1.1%.
The personal income category was cut back 0.2% in the month, against the consensus expectation for a 0.4% decline and following a 0.4% decline in November. Annually, incomes are up 1.4%, compared with 2.5% in the November report.
Compensation fell 0.3% in December after a 0.1% decline in November, while wages and salaries also fell 0.3%, adding to the 0.2% decline in November.
The Federal Reserve's preferred measure of inflation, the personal consumption & expenditures (PCE) core deflator, was flat for the third straight month in December, as expected.
Annual core PCE fell back to 1.7%, three-tenths below the Fed's unofficial target level of 2.0%. The PCE deflator came in at 0.6%, despite expectations for a rate of 1.0%.
By Stephen Huebl and edited by Sarah Sussman
©CEP News Ltd. 2009