The December personal income and spending report showed that for the huge consumption sector of the economy, “steady as she goes” continued, as both nominal and real personal income and spending rose again in December. But as I emphasized one month ago, there are many signs of a late cycle configuration.Specifically, nominally personal income rose 0.4%, while spending rose 0.7%. Since the deflator increased 0.3%, real income rose 0.1%, and real spending rose 0.4%, continuing their consistent trend since mid-year 2022: Real income less government transfers, one of the metrics that the NBER looks at to determine economic expansions vs. recessions, also increased, by 0.2%, in December, continuing its uptrend as well: In the last few months there has been a debate about whether inflation has returned. My position was that there was no persuasive evidence. But this month’s increase of 0.3% was the hottest since April, suggesting that perhaps inflation has returned to some extent. On the other hand, as the below graph makes clear, the disinflation of earlier this year was mainly about the complete lack of inflation in October and November 2023. With those out of the comparisons, it is not a surprise that the YoY comparisons have increased: Last month I wrote that since April, prices had only risen a total of 0.9%, for a 1.6% annual rate, below the Fed’s target. With the addition of this month, those figures increase to 1.2% and 1.8% respectively: so whether we get a burst of inflation in January and February, as we have in the past several years, will make all the difference. On a full YoY basis, prices increased 2.6%, up from 2.1% in September (blue in the graph below). Services (gold) were up 3.8% YoY. Inflation in this sector has been flat for the past 12 months, varying between 3.7% and 4.2%. What has happened in the past few months is that the *delfation* in goods (red) has ended, as they were unchanged YoY in December: Note that the long term graph of the YoY inflation in services (normed so that the current 3.8% level shows at the 0 line) shows that these remain quite elevated compared with the last 30 years: It is noteworthy that goods inflation increasing, and services inflation remaining elevated, is a typical late cycle configuration.Further, the personal saving rate continued its year-long decline from 5.5% last January to 3.8%. This is the lowest number since December 2022: Although I won’t bother with the long term historical graph this month, excluding 2022 this is the lowest saving rate ever with the exception of 1999 and 2005-07. As you probably know, those two episodes occurred at or approaching the peaks of each of those two cycles. In other words, as the expansion continued, consumers get further out over their skis, and so more vulnerable to an adverse shock.Finally, the PCE price index is used to calculate real manufacturing and trade sales (with a one month lag), another metric used by the NBER to determine if the economy is in recession or not. These sales rose 0.3% in November, continuing their post-pandemic uptrend: In sum, the good news continued to be  is that the consumption sector remained healthy and positive in December, consistent with its trend since June 2022. But as I wrote last month, the decline in the saving rate, together with both the increase in goods prices and the continued elevation in services inflation, suggest that we are later in this expansion cycle.More By This Author:Long Leading Components Of GDP Suggest Continuing If Sluggish Expansion Through 2025 Continuing Jobless Claims Trend Telegraphs Weak But Still Expanding Economy Repeat Home Sales Indexes For November Show YoY Deceleration, M/M Stabilizing