The Personal Spending and Income data for December were close to expectations and in line with the GDP figures on spending. Personal Income rose a decent 0.5% M/M, following a 0.1% M/M increase in November. Spending was flat on the month after a 0.1% M/M gain in November. In real terms, spending was even negative. The divergence between spending and income growth means that households saved again more. The data confirm that consumer spending momentum has decreased sharply going into the first quarter of 2012, suggesting that consumption won’t bring a big boost to Q1 GDP and thus a modest GDP growth figure is to be expected. The PCE deflator rose by 2.4% Y/Y from an upward revised 2.6% Y/Y previously, while core PCE stabilized at 1.8% Y/Y. The decline in inflation, which started in October, will probably continue and allow the Fed, if needed, to implement another QE package. The outcome had little impact on markets.