U.S. Core PCE Price Inflation Stays Low in December; Real Spending Gain Remains Firm

The PCE chain price index rose 0.3% during December after edging 0.1% higher in November and rising 0.2% in both of the prior two months. These gains were unrevised. The y/y rise increased to 2.6%, its strongest gain since May. The price index excluding food & energy rose 0.2% last month after a 0.1% rise and two months of 0.3% gain. The y/y rise held at 2.8% last month.

Durable goods prices weakened 0.4% (-1.1% y/y) in December after holding steady in November. Motor vehicle & prices rose 0.6% (-0.9% y/y) following a 0.7% rise. Recreational product prices declined 1.2% (-0.9% y/y) last month, after falling in each of the prior four months, while home furnishings & appliance costs weakened 1.1% (-2.3% y/y) after holding steady for two straight months.

Prices of nondurable goods rose 0.5% (0.6% y/y) last month after holding steady in November. Clothing prices rose 0.2% (1.1% y/y) after a 0.1% gain. The cost of food rose 0.2% (1.6% y/y) for a second straight month and gasoline & oil prices jumped 4.2% (-4.1% y/y) after a 0.5% rise.

Services prices increased 0.3% (3.8% y/y) in December, after rising 0.2% in the prior month. Housing & utility prices rose 0.3% (4.6% y/y) after a 0.2% rise, and services prices excluding energy & healthcare increased 0.3% (4.2% y/y) in December after rising a 0.2%. Healthcare prices rose 0.2% (2.5% y/y) after a 0.1% uptick and housing & utilities costs rose 0.3% (4.6% y/y). Transportation prices strengthened 1.7% (4.2% y/y) while hotel & restaurant prices held steady (+3.3% y/y). Recreation services costs rose 0.4% (2.8% y/y) for a second straight month.

Personal consumption expenditures (PCE) increased 0.7% (5.7% y/y) in December, after a 0.6% November rise, revised from 0.4%. A 0.5% increase had been expected in the Action Economics Forecast Survey. When adjusted for price changes, PCE increased 0.4% (3.1% y/y) last month, after moving 0.5% higher in November.

Real spending on durable goods strengthened 1.1% (6.1% y/y) in December, after a 2.6% November increase. Real spending on motor vehicles increased 0.3% (6.6% y/y), after surging 5.6% in November. Real outlays on furnishings & appliances jumped 1.4% (6.4% y/y) in last month, following a 0.9% November rise, while real spending on recreational goods & vehicles also surged by 1.6% (5.9% y/y) last month, after a 2.2% November increase. Spending on “other” durable goods jumped 1.3% (4.5% y/y) after falling 0.7% in November.

Nondurable goods spending in real terms improved 0.5% (2.2% y/y) in December following a 0.2% gain. Real clothing and footwear purchases improved 0.4% (1.5% y/y) last month, following a 0.8% gain in November. Real food & beverage purchases increased 0.5% (1.9% y/y), after easing 0.2%. Real outlays on gasoline & other energy products improved 1.0% (-0.3% y/y), after falling 1.0%. Real spending on “other” nondurable goods rose 0.4% (3.3% y/y) last month, following a 0.7% rise.

Real spending on services moved 0.3% higher (2.9% y/y) in December, following a 0.2% increase. Real spending on housing & utilities rose 0.5% (1.6% y/y) last month, after holding steady in November, while real healthcare spending rose 0.2% (5.0% y/y) for the second straight month. Real spending on food services & accommodations weakened 0.2% (unchanged y/y) after falling 0.3% during November. Real spending on financial services & insurance gained 0.1% (2.1% y/y) after a 0.5% improvement. Real spending on transportation services jumped 2.2% (4.5% y/y) in December, after a rise of 0.9% in November. Recreation spending improved 0.1% (1.4% y/y) after rising 1.0% in November. A 0.8% rise (2.8% y/y) in spending on “other” services came after 0.2% improvement in the prior month.

Personal income rose 0.4% (5.3% y/y) in December, after an unrevised rise of 0.3% in November. A 0.4% gain was expected. Wages & salaries rose 0.4% (5.7% y/y) last month, following two straight 0.5% increases. Rental income improved 0.6% (5.9% y/y), after rising 0.2% in November. Proprietors’ income moved 0.5% higher (3.5% y/y), following a 0.2% gain in November. Income from assets rose 0.2% (0.7% y/y), after declining 0.2%, and current transfer receipts rose 0.2% (8.3% y/y) in December, after rising 0.1% in November. Government social benefits rose 0.2% (8.1% y/y) in December, after a 0.1% improvement in the prior month.

Disposable personal income increased 0.4% (5.0% y/y) in December, following a rise of 0.3% in November. After adjusting for price changes, disposable income improved 0.1% (2.4% y/y) in December for the second straight month. The y/y increase slowed to 2.4% from 4.7% at the end of 2023.

The personal saving rate fell to 3.8% in December, after declining to 4.1% in November. It began the year at 5.5%. Personal saving fell 5.6% (-8.3% y/y) in December, after falling 6.3% in November.

The personal income and consumption figures are available in Haver’s USECON database with detail in the USNA database. The Action Economics forecasts are in AS1REPNA.