United States consumer spending flat in December but savings rate up

Personal income in the USA rose in line with economist estimates in the month of December, according to a report released by the Commerce Department on Monday, although the report also said personal spending came in virtually unchanged.

The modest increase in construction spending came as spending on public construction surged up 1.9% to an annual rate of USD292.5 billion. The Bloomberg survey median forecast called for a 0.1 percent increase.

Construction spending ended 2015 on a weaker note, but was strong throughout the yaer. Consumers saved more instead. Inflation “is expected to remain low in the near term, in part because of the further declines in energy prices”, officials said in a statement at the conclusion of a two-day meeting in Washington last week.

The report showed the price index tied to consumer spending decreased 0.1 percent in December. This sector was strong for most of the year, but it has declined in three of the past four months.

Disposable personal income, or personal income less personal current taxes, also climbed by 0.3 percent in December after rising by 0.2 percent in November. That was three times September’s 0.2% figure and the highest 12-month pace in a year. This inflation measure is preferred by Federal Reserve policy makers and hasn’t met their target since April 2012.

Excluding often volatile energy and food costs, so-called core inflation was 1.4% a year ago. The so-called core PCE price index increased 1.4 percent in the 12 months through December after a similar gain in November.

The gains made by consumers have been spearheaded by over the past several years that’s taken the US unemployment rate down to a postrecession low of 5%.

Spending on highway construction jumped 9.4% to a rate of USD95.4 billion, while spending on educational construction fell by 0.5% to a rate of USD69.4 billion.