Personal spending falls more than expected

Personal spending fell more than expected in December.

Personal spending fell 0.3%, missing expectations for a 0.2% decline, while personal income rose 0.3% which was better than expected.

For the full year, however, consumer spending in 2014 rose 2.5%, the biggest year-on-year increase since 2006, according to Bloomberg.

This report also included the personal consumption expenditures, or PCE, inflation measure, which showed that prices fell 0.2% month-on-month in December, slightly less than the 0.3% decline that was forecast.

PCE rose 0.7% over last year, below expectations for a 0.8% increase. This was also the smallest year-on-year increase in prices since October 2009.

“Core” PCE, which strips out the more volatile cost of food and gas, was flat in December and up 1.3% over the prior year, both of which were in-line with expectations.

In a note to clients following the report, Ian Shepherdson at Pantheon Macro said, “In one line: The trend in spending is strong, despite the December dip.”

Shepherdson added that, “real spending does not move in line with real income each month, and Dec spending dipped 0.1%, held back by 0.7% drop in the durable goods component, led by a 2.0% drop in spending on autos.”

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