The PCE price index is part of the Commerce Department’s monthly Personal Income and Outlays report, which includes comprehensive data on how Americans earn, spend and save.

And in December, they ramped up their spending significantly.

Consumer spending shot up 0.7% from November, exceeding economists’ expectations for a 0.5% gain.

With Thanksgiving landing late in November, the holiday shopping season was largely concentrated in December; also, the increase likely reflected some replacement purchases of cars, furniture and other goods damaged by the two major hurricanes that hit in October 2024, Gregory Daco, chief economist at EY-Parthenon, told CNN Friday.

Another likely factor is that consumers also were buying more durable goods in anticipation of tariffs that have been threatened by President Donald Trump, Samuel Tombs, Pantheon Macroeconomics’ chief US economist, wrote in a note to clients on Friday.

Purchases of TVs, technology products and autos have notably surged, he noted.

Trump on Thursday reiterated plans to slap a 25% tariff on imports from both copyright and Mexico.

“Consumers shop with https://roozanit.ir an eye on bargains, and 25% tariffs of the imports of America’s two largest trading partners could force prices of store-bought goods well beyond the reach of many if not all consumers,” economist Chris Rupkey of FwdBonds wrote in commentary on Friday. “There may not be another full-blown cost of living crisis, but the future with tariffs certainly looks less affordable for all Americans.”

“We are not sure the country is willing to pay the price for the new administration’s social goals of stopping migrants and illicit drugs at the border,” he added.

Households’ personal saving rate — savings as a percentage after tax — was the lowest in two years, Commerce Department data shows. The saving rate dropped to 3.8% from 4.1% in November, according to Friday’s report.

“It now is 2 percentage points below its 2015-to-19 average,” Tombs said.

Consumers also are leaning more on their credit cards. The share of people making just the minimum payment on their credit cards hit a 12-year high, according to third-quarter 2024 data released last week by the Federal Reserve Bank of Philadelphia.

“It’s an orange flag,” EY-Parthenon’s Daco told CNN. “We’re noticing that there is a bifurcation in the consumer outlook in that the consumers at the lower-to-medium end of the income spectrum are spending more judiciously in a high-price, high-interest-rate environment.”

The strong momentum seen in the consumer spending data has largely been driven by higher income individuals, he said.

Overall, personal income grew 0.4% in December, marking a slight acceleration from the 0.3% gain seen the month before, according to Friday’s report.

“The monthly numbers add some more light on the income side of the economy,” Eugenio Alemán, chief economist at Raymond James, wrote Friday. “This showed that consumers are deploying their savings to ‘keep up with the Joneses,’ which could become a problem down the line.”

However, he added, the inflationary risks are much higher than they were before the election, he added.

“As we look further out, then you might start to see the pressures from some of the policies that are put in place — immigration restrictions; perhaps even some deregulation; and tariffs, of course, are big, big unknowns,” he said. “But their effect on the economy is likely to take a bit more time.”

The path to the Fed’s 2% inflation target was expected to be long and bumpy, and it has been a little choppy the past couple of months, prompting the central bank to take a more cautious approach to rate cuts in 2025.

Fed Chair Jerome Powell said Wednesday that inflation remains elevated; but the labor market is solid, and the economy is strong, so the central bank doesn’t have to hurry more rate cuts. He also indicated policymakers are taking a wait-and-see approach as some of Trump’s sweeping policy moves come to fruition.