U.S. Personal Income & Spending (October & November 2025)

Consumer spending remains resilient, outpacing income 

• Personal income rose 0.3% month-over-month (m/m) in November, up from 0.1% m/m in October (also released today) and slightly below expectations. On an inflation adjusted basis, personal income was up just 0.1% m/m in November, and down 0.1% in October. 
• Consumer spending grew by 0.5% month-over-month in nominal terms, matching the pace seen in October and aligning with market expectations. After adjusting for inflation, the real spending rose by 0.3% m/m in both October and November. 
• Examining the broad categories, spending on both goods and services rose in real terms in both October and November. Spending on goods rose by 0.6% in November, following a 0.4% m/m gain in October. Spending on services increased by 0.3% in November, following a 0.2% gain in the prior month.
• With spending outpacing income, the personal saving rate declined to 3.5% in November, down from 3.7% in the prior month and 4.9% a year ago. This marks the first time saving rate dipped below 4% since 2022.  
• Inflation remains persistently elevated above the Fed's 2% target. Core PCE – the Fed's preferred inflation gauge – rose by 0.2% in both October and November, on par with the pace seen prior to the shutdown. In annual terms, core PCE inflation was up 2.8% year-over-year in November, up slightly from 2.7% pace seen in October.

Key Implications

• Personal spending was robust through the first two months of Q4 2025, echoing other indicators, such as retail sales, and suggesting that consumer spending remained more resilient throughout the lengthy government shutdown than expected. In volume terms, consumer spending was up 0.6% from September, putting our estimate of Q4 2025 PCE growth at 3.0% (annualized) – not much slower than the 3.5% pace seen in Q3 but considerably higher than originally projected. It was also notable that spending continued to outpace income, with saving rate falling to levels not seen since late-2022 when core measures of inflation were around their peak. Evidently, households are saving less or dipping into their savings to maintain the spending momentum, particularly during the period where some payments were disrupted by the government shutdown.
• We expect consumer spending to remain robust at the start of 2026. Consumers should benefit from past interest rate cuts, some stabilization in the labor market, and ongoing accumulation in wealth. The fiscal boost from higher OBBBA-linked tax refunds—which are expected to arrive between February and April—should also provide another tailwind to household income and spending. This robust spending momentum and steady inflationary backdrop provide the FOMC with reasons to remain patient regarding further rate cuts when its members meet next week.