With Americans spending less than they earned, the savings rate rose to 5.5% from 5.3% to match a three-year high.
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Personal income rose 0.3% in December, while personal spending was flat, a monthly Commerce Department release showed on Monday. Over the 12 months ending in December, this price index is up 0.6 percent.
Personal Income outpaced expectations in December at +0.3% MoM vs. +0.2% anticipated and +0.3% November.
Economists also expect that an improving jobs market will fuel spending momentum and help push economic growth back above 2 per cent in the current January-March quarter. Spending increased 3.4 percent in 2015 after advancing 4.2 percent in 2014.
Sharply lower oil prices were a key factor. Prices for US government debt also were lower. It grew 3.5 percent in 2015, the most in nine years. Wages and salaries increased 0.2 percent after shooting up 0.5 percent in November.
Income at the disposal of households after accounting for inflation in 2015 recorded its biggest increase since 2006.
Household spending cooled in December as Americans used gains in incomes to boost their savings.
Even though consumers cut back on spending in the fourth quarter, it’s not because their finances have gotten worse, especially when inflation is taken into account.
The report showed the price index tied to consumer spending decreased 0.1 percent in December. In the 12 months through December, the personal consumption expenditures (PCE) price index, however, rose 0.6 percent after increasing 0.4 percent in November.
The Federal Reserve wants to see inflation as measured by the PCE climb to a 2% pace. News storiesdisplayed here appear in our category for Business and are licensed via a specific agreement between LongIsland.comand The Associated Press, the world’s oldest and largest news organization.
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Core PCE prices, which exclude food and energy prices, dipped by 0.1 percent in December after coming in flat in the previous month, while the annual rate of growth held at 1.4 percent.
