Highlights
Personal income rose a respectable 0.4% in December and personal outlays were up a sharp 0.9%, both at or near expectations. Income showed a gain in transfer receipts tied to social security payments and a second straight steady wage gain of 0.3%. Gains for vehicle sales boosted outlays for a second straight month.

Price readings were tame, a plus for the economic outlook and ahead of tomorrow's big FOMC meeting. The core PCE deflator rose only 0.1%, though the two prior months were both revised upward a tenth to 0.2%. December's year-on-year core increase is 1.9%, under the 2.0% line where policy makers get nervous. The overall price index was unchanged and up 2.8% on the year.

A big negative in the report is once again the savings rate which showed a seventh straight monthly contraction, down a sharp 0.7% in December. The decline in savings raises questions on the sustainability of consumption.

Bonds firmed in what appeared to be a knee-jerk reaction to the benign core price reading. Further market reaction is likely to be limited. Consumer spending has been stimulated by vehicle incentives, an uncertain category due to thinning manufacturer margins.