While the Commerce Department released a report on Friday showing U.S. personal income increased by much more than expected in the month of January, the report also showed a smaller than expected uptick in personal spending.
The report said personal income climbed by 0.6 percent in January after inching up by a downwardly revised 0.1 percent in December.
Economists had expected personal income to rise by 0.3 percent compared to the 0.2 percent uptick originally reported for the previous month.
Disposable personal income, or personal income less personal current taxes, also increased by 0.6 percent in January after edging up by 0.1 percent in December.
The report said real disposable income, which is adjusted to remove price changes, advanced by 0.5 percent in January after dipping by 0.1 percent in December.
Meanwhile, the Commerce Department said personal spending rose by 0.2 percent in January after climbing by an upwardly revised 0.4 percent in December.
Personal spending had been expected to rise by 0.3 percent, matching the increase originally reported for the previous month.
Excluding price changes, personal spending inched up by just 0.1 percent for the second consecutive month.
“The 0.6% m/m rise in personal income was more encouraging and, with the labor market seemingly still in strong shape, ordinarily that would be a good reason to expect consumption growth to accelerate over the next few months,” said Andrew Hunter, Senior U.S. Economist at Capital Economics.
“But the likely hit to consumer confidence from virus fears and the stock market plunge poses a clear downside risk to that assumption,” he added. “A widespread epidemic developing in the US would risk a severe decline in retail spending.”
With income rising by much more than spending, personal saving as a percentage of disposable personal income jumped to 7.9 percent in January from 7.5 percent in December.
A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth ticked up to 1.6 percent in January from 1.5 percent in December.
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