Fiscal Cliff Worries Helped Boost Personal Income 2.6% for December

Personal income increased 2.6% for December, outpacing consumer spending's 0.2% increase, the Commerce Department reported [link opens in PDF] today. Analysts' income expectations of a 0.7% increase were more than tripled, but Wall Street's estimated 0.3% rise in spending overshot actual results.

Compared to November's revised 1% increase in income and 0.4% bump in spending, these newest numbers reflect some renewed economic activity, but not necessarily coupled with economic confidence.

In a strange turn of events, fiscal cliff fears may have been the cause of much of the improvements in personal income in November and December, according to the Commerce Department, as fears of dividend tax hikes pushed companies to pay out accelerated and special dividends, while anticipation of changes in individual income tax rates boosted bonuses and other irregular wage payments.

For the 2012 year, personal income increased 3.5%, compared to a 5.1% gain in 2011. Rental and dividend income rose 13.1% and 11.9%, respectively, while personal interest income decreased slightly by 1.7%. 

Consumer spending also slowed, rising 3.6% compared to 5% the previous year. Durable goods purchases increased the most (6.3%), while services spending lagged behind with a 3.3% gain.


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