American households slowed spending last month but the Federal Reserve’s preferred inflation measure exceeded expectations, bolstering the case for continued tightening in 2023.

Data released by the Bureau of Economic Analysis this morning showed inflation-adjusted household outlays were unchanged in November, decelerating sharply from the 0.5-percent gain posted in the prior month. Markets had expected a print closer to 0.2 percent.

Personal income rose 0.4 percent month-over-month, led by a 0.5-percent increase in private sector wages and salaries. Incomes are 4.7 percent higher relative to the same month last year.

The core personal consumption expenditures index – targeted by the Federal Reserve – rose 0.2 percent from October, up 4.7 percent year over year – well aligned with consensus estimates, and well below the prior month’s gain. The overall personal consumption expenditures index was up 5.5 percent from a year ago.

Separate data showed purchases of long-lasting goods falling -2.1 percent in November—sharply missing the -1 percent forecast loss—as consumer spending preferences shifted toward services. Non-defence, non-aircraft capital goods – a proxy for underlying consumer demand – shrank -0,1 percent in November. Growth in durable goods orders was also revised down for October, from 1.1 percent to a 0.7 percent month-over-month gain.

Yields climbed and the greenback ticked higher as traders braced for more Federal Reserve rate hikes in the coming months.

Separately, the Canadian economy grew 0.1 percent on a month-over-month basis in October, matching initial estimates as hotter activity in the services sector helped offset losses in goods-producing areas. An advance estimate for November pointed to another 0.1-percent expansion, underlining continued resilience in an economy that has been hit with higher interest rates and slowing real estate market activity over the last six months. Most observers expect a contraction to take place in the early new year.

The Canadian dollar climbed in the minutes after the data hit the wires, suggesting that traders are betting on one more hike at the Bank of Canada’s January meeting.