US Income and Spending Rise as PCE Inflation Firms

US personal income and consumer spending both increased in December 2025, pointing to steady household demand as inflation pressures edged higher. Data from the Bureau of Economic Analysis showed personal income rose by $86.2 billion, a 0.3% month-over-month gain. Disposable personal income also increased 0.3%, or $75.7 billion, while personal consumption expenditures climbed $91.0 billion, equivalent to a 0.4% monthly rise.

The figures suggest consumers remained willing to spend into year-end, though partly by relying less on savings. Personal savings fell to $830.8 billion, and the saving rate eased to 3.6% of disposable income, indicating a thinner buffer if economic conditions were to weaken.

Income gains were supported by two main sources:

Higher personal current transfer receipts
Rising labor compensation

Together, these helped sustain spending despite elevated prices and borrowing costs.

Inflation Pressures Remain Elevated

Spending patterns continued to favor services over goods. The increase in total PCE was driven by a $98.5 billion rise in services spending, while goods outlays declined by $7.5 billion. This reflects an ongoing preference for services such as housing-related costs, healthcare, and leisure, alongside softer demand for physical goods.

Inflation data showed firmer monthly pressures. The PCE price index rose 0.4% in December, with core PCE inflation, which excludes food and energy, also up 0.4%. On a year-over-year basis, headline PCE inflation stood at 2.9%, while core inflation was 3.0%.

Overall, the combination of steady spending and firm inflation keeps attention on the Federal Reserve’s policy outlook, as markets assess whether price pressures continue to ease toward the 2% target or remain sticky in early 2026.

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