January Spending Up, But Income Growth Slows
The Commerce Department said Monday that personal spending rose by 0.5% in January, slightly better than expected. But incomes edged up only 0.1%, significantly lower than the 0.4% gain economists had expected.
The income gain was the weakest showing in four months and raised more concerns about whether consumers will be able to keep spending at a sufficiently strong pace to support an economic rebound. Consumer spending is closely watched because it accounts for 70% of total economic activity.
The weakness came even though private wages and salaries were up by $16.1 billion at an annual rate, compared to a $2.3 billion gain in December. However, households did not get the usual boost they see from the government’s annual cost-of-living adjustment for Social Security and other benefits.
The 50 million recipients of Social Security saw no gain at all in Janury because of low inflation, the first time that has occurred in more than three decades. [Read the full article]