US personal spending rose 0.4% in December, matching forecasts.
This suggests consumers kept spending at a steady pace at the end of 2025. No further details were provided.
Market Impact And Fed Outlook
The 0.4% rise in December spending supports our view that the economy is growing in a steady, but slow, way. For derivatives traders, the lack of a surprise removes a major trigger for near-term market swings. We think this supports the Federal Reserve staying patient on interest rates into the spring.
With markets absorbing expected data, implied volatility on major indexes may ease in the near term. We saw the VIX drop below 14 after similar in-line releases in Q4 2025, which benefited traders selling option premium. In this type of market, strategies such as iron condors on broad-market ETFs can be appealing, as they aim to profit from range-bound trading.
Our focus now shifts to upcoming inflation data to help time the first possible rate cut, since steady growth alone is unlikely to push the Fed into action. Fed funds futures currently price about a 65% chance of a 25-basis-point cut by the June 2026 meeting. If inflation comes in hotter than expected, those odds would likely fall, which could increase volatility.
Although spending held firm, the same December report showed the personal savings rate fell to 3.4%, continuing last year’s trend. This suggests consumers are using savings to keep spending, which cannot continue forever. Another drop in the next report could be an early warning sign for consumer discretionary stocks.
Consumer Balance Sheet Watch
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