US personal incomes rise less than forecast, Commerce Department says

US consumer spending rose in line with expectations in December while growth in personal income fell short of estimates, the Commerce Department revealed on Monday.

Personal spending increased 0.5% last month to $63.1bn, as expected, following a 0.2% gain in November.

Personal income rose 0.3% to $50.2bn in December, compared to estimates for a 0.4% increase. The preliminary estimate for November was revised up to show a gain of 0.1% on the month instead of an unchanged reading.

The core personal consumption expenditure deflator - which excludes food and energy and is the Federal Reserve’s preferred measure of inflation - was up 1.7% year-on-year in December, in line with analysts’ estimates and the previous month’s rate of growth.

On the month, core PCE climbed 0.1% in December, as predicted, picking up from November’s 0%.

Headline PCE climbed 0.2% month-on-month and 1.6% year-on-year in December, after November’s 0.1% monthly increase and 1.4% yearly growth.

“Nevertheless, with the Fed’s preferred core inflation measure still a little below the 2% target, we expect the Fed to take its time with the next interest rate hike,” said Paul Ashworth, chief US economist at Capital Economics.

“For the time being, the Fed is in wait-and-see mode until it gets some more clarity on the size, composition and timing of the fiscal stimulus. We suspect that it will be June before the Fed raises interest rates again.”

As of 1348 GMT, the yield on the benchmark 10-year US Treasury note was off by one basis point to 2.48%.