Income, spending up

NEW YORK (CNNMoney.com) -- American paychecks and spending both picked up steam in December, according to a government report released on Thursday.

The Commerce Department reported that personal income rose 0.5 percent in the month, up from the 0.3 percent rise seen in November. The December gain was in line with forecasts of economists surveyed by Briefing.com.

Spending by individuals rose 0.7 percent, up from a 0.5 percent gain in November and also in line with economists' forecasts.

A closely watched inflation reading in the report, the core PCE deflator, which measures prices paid by individuals excluding food and energy, posted only a 0.1 percent rise, although that was up from no change in those prices seen in the November reading.

That left the year-over-year change in the core PCE deflator at 2.2 percent, just above what most economists believe is the Federal Reserve's comfort zone of a 1 to 2 percent rise in that reading.

Robert Brusca of FAO Economics said that the report is close to the picture of the economy laid out by the Fed when it left interest rates unchanged on Wednesday. It's statement suggested the economy was showing strength while inflation pressures were letting up.

"The data for the day is a contender for the Goldilocks award," said Brusca. "The right stuff, enough of it and no overdose in sight."

The report once again showed a negative savings rate of 1.2 percent, meaning that the typical American was spending $101.20 for every $100 of after-tax income. That's up slightly from the negative savings rate of 1.0 percent in November.

Fed holds again