The Commerce Department released a report on Wednesday showing a steep drop in U.S. personal income in the month of November.
The report said personal income slumped by 1.1 percent in November after falling by a revised 0.6 percent in October.
Economists had expected personal income to dip by 0.3 percent compared to the 0.7 percent drop originally reported for the previous month.
Disposable personal income, or personal income less personal current taxes, also tumbled by 1.2 percent in November following a 0.7 percent decrease in October.
The bigger than expected drop in personal income came as federal economic recovery payments slowed as pandemic-related assistance programs continued to wind down.
The Commerce Department said personal spending also fell by 0.4 percent in November after rising by 0.3 percent in October.
Personal spending was expected to edge down by 0.2 percent compared to the 0.5 percent increase originally reported for the previous month.
Excluding price changes, personal spending still declined by 0.4 percent in November after rising by 0.3 percent in October.
“Despite the monthly contraction in spending, we expect real consumer spending will advance around 1.0% in Q4 (just over 4% annualized) supported by strong end-of-summer momentum,” said Gregory Daco, Chief U.S. Economist at Capital Economics.
He added, “Still, the economy is entering 2021 with very little dynamism, and the urgency of passing the Covid relief package cannot be understated.”
With income falling by much more than spending, personal saving as a percentage of disposable income dropped to 12.9 percent in November from 13.6 percent in October.
The material has been provided by InstaForex Company – www.instaforex.com