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Consensus Outlook
Personal income is seen rising a solid 0.4 percent in December. January data on income will also be released with this report and is also expected to rise 0.4 percent. Consumer spending had been strong but not following December's 1.2 percent drop in retail sales. Expectations for December spending see a 0.3 percent decline (January data on spending as well as inflation will not be released with this report). The core PCE price index, which excludes both food and energy, is seen posting a 0.2 percent December rise for a year-on-year rate of 1.9 percent. The consensus for the overall PCE price index is no change for a year-on-year rate of 1.7 percent.
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Definition
Personal income represents the income that households receive from all sources including wages and salaries, fringe benefits such as employer contributions to private pension plans, proprietors' income, income from rent, dividends and interest and transfer payments such as Social Security and unemployment compensation. Personal contributions for social insurance are subtracted from personal income.
Personal consumption expenditures are the major portion of personal outlays, which also include personal interest payments and transfer payments. Personal consumption expenditures are divided into durable goods, nondurable goods and services. These figures are the monthly analogues to the quarterly consumption expenditures in the GDP report, available in nominal and real (inflation-adjusted) dollars. Economic performance is more appropriately measured after the effects of inflation are removed.
Each month, the Bureau of Economic Analysis also compiles the personal consumption expenditure price index, also known as the PCE price index. This inflation index measures a basket of goods and services that is updated annually in contrast to the CPI, which measures a fixed basket. Why Investors Care
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