Personal Income Surges 2.6%, Crushing Expectations

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Personal incomes expanded 2.6 per cent in December, beating expectations of 0.8 per cent growth.

November income growth was revised up to 1.0 per cent from the 0.6 per cent gain reported last month.

Spending was up 0.2 per cent, slightly below expectations of a 0.3 per cent rise.

The boost seems to have been driven by a surge in divided payouts ahead of the December 31 tax deadline.

From the press release:

“Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates.  Personal income in December was also boosted by lump-sum social security benefit payments.”

TD Securities’ Millan Mulraine said the number is encouraging despite the one off dividend payment:

“On balance, even abstracting from the one-off surge in dividend payments (which we expect to reverse in January) the general tone of this report was quite encouraging. In particular, the improvement in wage growth and subdued inflationary backdrop provides the justification for the Fed to continue its current accommodative policy efforts while reinforcing their benign views on inflation and inflationary expectations.

Moreover, the surge in savings is likely to provide the kind of underpinning for personal spending in the coming months that could boost overall economic activity.”

Personal income climbed 3.5 per cent in 2012, compared with 5.1 per cent in 2011. Personal consumption expenditures (PCE) or spending was up 3.6 per cent, compared with 5 per cent in 2011.

Click here for the entire release >

SEE ALSO: How The Fiscal Cliff Freakout Boosted Personal Incomes >

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