Highlights
Personal income in December remained healthy while inflation stayed a little on the high side. However, consumer spending slowed sharply. Personal income in December rose 0.5 percent, following a 0.4 percent boost in November. December's gain came in just above the market forecast for a 0.4 percent increase. Within personal income, the all important wages and salaries component advanced 0.4 percent, following a 0.6 percent increase in November. Personal income on a year-on-year basis eased to up 5.8 percent in December from up 6.1 percent the previous month.

On the spending side, the economy may be getting some serious softening as consumer spending slowed to a 0.2 percent rise after November's sharp 1.0 surge. The consensus expected a 0.1 percent uptick in personal spending in December.

Inflation moderated but stayed above the Fed's comfort zone in December. The overall PCE price index increased 0.2 percent in December, after surging 0.6 percent in November. On an unrounded basis, the headline PCE price index rose 0.24847 percent in December, following a 0.56050 percent boost in November. The core PCE price index held steady at 0.2 percent in December but the core measure has been on the high side of 0.2 percent for the last three months. On an unrounded basis, the core PCE price index rose 0.22780 percent in December, following a 0.21527 percent increase the month before. The latest number matched the consensus forecast for a 0.2 percent increase. Year-on-year headline inflation edged down slightly but clearly is too strong for the Fed's preferences, slipping to3.5_ percent in December from 3.6 percent in November. Core inflation held steady at 2.2 percent year-on-year in December.

Today's report is very mixed. Income remains healthy but spending may be slowing but it is too soon to really tell since December came off such a strong November. Inflation is still too strong but the Fed may be getting enough slowing in the economy to bring inflation down. While different parts of the income report could push the markets in different directions, focus appears to be on this morning's spike in jobless claims which pushed interest rates and the dollar down even though special factors appear to have caused the jump in claims.