Washington, DC, January 30, 2006--Consumer spending rose 0.9% in December as spending increased on durable goods, according to the Commerce Department.
Personal incomes increased 0.4% in December. Real disposable incomes also increased 0.4%. The figures were roughly in line with expectations of economists.
The core personal consumption expenditure price index-- the Federal Reserve's preferred inflation gauge--rose 0.1% in December after 0.2% gains the previous four months. The headline PCE was unchanged in December.
In the past 12 months, the core PCE price index has increased 1.9%, just inside the Fed's comfort zone of 1% to 2%.
The monthly data show consumer spending accelerated during the quarter after decreasing in October. Real consumer spending--that is, adjusted for inflation--was flat in October before rising 0.9% in both November and December.
That momentum should provide a lift to first-quarter GDP, economists say.
In December, real spending on durable goods increased 5% after a 3.7% gain in November. For the quarter, spending on durable goods plunged 17.5%, the biggest drop in 18 years, as auto sales fell sharply from historic highs in the summer months.
Real spending on nondurable goods rose 0.4% in December, as did spending on services.
With spending rising faster than disposable incomes, the personal savings rate fell to a negative 0.7% of disposable income. It's the seventh straight month of negative savings. For the year, savings were a negative 0.5%, the first full year of negative savings since 1933.
In December, income from labor compensation increased 0.3%. Wages increased 0.3%. Income from ownership of assets rose 1.1%, while rental income fell 4.1%.
