US personal spending and price pressures slow in November

Americans reined in their spending towards the end of 2022 but only following the sharp acceleration seen during the previous month.

That was despite faster than expected growth in incomes.

Price pressures ebbed alongside but were a tad mixed in comparison to economists' forecasts.

According to the Department of Commerce, in seasonally adjusted terms personal incomes increased at a month-on-month pace of 0.4% (consensus: 0.2%) in November.

Personal spending on the other hand was up by just 0.1% (consensus: 0.2%), but the previous month's increase was revised up by a tenth of a percentage point to 0.9%.

Yet the personal saving rate continued to decline, from 3.2% in the previous month to 2.7%.

The headline price deflator for personal consumption expenditures printed at 5.5% year-on-year, down from 6.1% in October and below forecasts for a clip of 5.6%.

At the core level meanwhile, PCE prices were ahead by 4.7%, down from the 5.0% pace observed during the previous month but one tenth of a percentage point above expectations.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, pointed out how a 0.04% upwards revision to October's reading tipped the one-decimal print up to 0.3% from a preliminary estimate of 0.3%.

Regarding inflationary pressures in the key services sector and excluding housing rents, Shepherdson said that they would likely prove more stubborn than in other parts of the economy.

"Chair Powell has been very clear that the Fed believes slowing wage growth is key to sustainably low services inflation. But we think this is a decent bet as the labour market softens and inflation expectations drop, exerting downward pressure on wage demands," he added.

"Two good months of core PCE data are not enough fundamentally to change the Fed's view of the inflation outlook, but we think the next few reports will be similarly good, and the 25bp rate hike we expect on February 1 should be the final tightening of this cycle."