NEW YORK (Reuters) - U.S. consumer spending rose slightly less than expected in December as households opted to save extra cash, lifting savings to a six-month high, a government report showed on Monday.
KEY POINTS: * The Commerce Department said spending rose 0.2 percent after increasing by an upwardly revised 0.7 percent in November. * Consumer spending in November was previously reported to have climbed 0.5 percent, the third straight monthly gain in spending. * Analysts polled by Reuters had expected consumer spending, which normally accounts for over two-thirds of U.S. economic activity, to rise 0.3 percent last month. * Spending adjusted for inflation edged up 0.1 percent after rising 0.4 percent the prior month. * Personal income increased 0.4 percent last month after increasing 0.5 percent in November. * Analysts were expecting a 0.3 percent increase. * Real disposable income climbed 0.3 percent last month after rising 0.3 percent in November. & The savings rate rose to 4.8 percent from 4.5 percent the prior month. * The personal consumption expenditures price index, excluding food and energy, rose 1.5 percent from a year ago in December.
“Little bit less on the spending side, but income was up a little more. The savings rate is still quite high, it’s 4.8 percent, so it looks like people are still focused on debt service, reducing the debt burden.
“Nondurable spending was down the most, which is usually an indication of lower prices for gasoline and other energy commodities. It’s a good thing, because durable goods consumption was OK, services was good, so people saved a little money on gasoline in December after a run-up in October and November.
“The markets are still getting used to the idea that consumers are going to be paying down debt for years. It’s something we’re going to have to get used to because debt levels are so high that it will probably take three or four years before consumer spending is back to what we think is normal.
“It looks like stocks are holding up OK, and bond yields are up a little bit today so it doesn’t look like anybody’s too bothered.”
JACOB OUBINA, CURRENCY STRATEGIST, FOREX.COM, BEDMINSTER, NEW
“Overall, risky assets like the number, so we’ve the yen crosses edging a little bit higher here and this is on the back of personal income being a touch higher than expected at 0.4 percent. But the previous month was also revised up ... so that’s also constructive for stocks going forward. Income growth has become one of the main focuses for the market here so seeing an expansion there is seen as a net positive for stocks. So the overall reaction is just for better supported yen crosses across the board here.”
STEVE GOLDMAN, MARKET STRATEGIST, WEEDEN & CO, GREENWICH,
“It’s good, it’s usually not a market mover though but it is favorable. We’re seeing income higher than expected, (that’s) a good thing, and spending a little weaker than expected.”
GARY THAYER, CHIEF MACROSTRATEGIST, WELLS FARGO ADVISORS, ST.
“The December spending numbers were revised up, so the weaker numbers for January are not so bad. The inflation numbers still look relatively benign, particularly the core inflation numbers. It suggests that the Fed still has some time to keep interest rates low. If inflation stays low, the only risk to Fed policy would be higher rates overseas.”
PETER KENNY, MANAGING DIRECTOR, KNIGHT EQUITY MARKETS, JERSEY
“There was a large decline in personal income, which wasn’t a surprise with our unemployment levels. It wasn’t a surprise but it wasn’t comforting.
“The savings rate was also high, and taken with personal income it speaks to the way people are changing their actions in relation to how they save. That’s a good long-term positive for the market.
“PCE was another positive, but none of this data will move the market today, even though it all confirms trends in a positive way. The driver today has been earnings, which have been consistently been better than expected today. That’s going to eventually put a floor under the market.”
MARKET REACTION: STOCKS: U.S. stock index futures rise slightly after personal income data. BONDS: U.S. Treasury debt prices steady at lower levels after data. DOLLAR: U.S. dollar steady at lower levels versus euro.