The Economy

Consumer Spending Increases 0.5% in January

The gain in personal spending is the largest since May and, along with other recent data, suggests the U.S. economy is holding steady in early 2016.
Katie Kuehner-HebertFebruary 26, 2016

January economic data posted Friday by the Commerce Department was positive on a number of fronts: consumer spending rose at the fastest pace in eight months as incomes continue to post gains, and inflation is starting to firm up.

Personal spending rose 0.5% in January, a sharp acceleration from December’s 0.1% gain and the largest monthly increase since May. Much of the increase was due to a 0.5% rise in personal income, the best gain since June.

Economists surveyed by the Wall Street Journal had forecast a 0.3% rise in spending and a 0.4% rise in incomes.

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“The reading adds to recent indicators suggesting the domestic economy is holding steady in early 2016, bolstered by a strong jobs market and firming wages, despite headwinds from global financial volatility and a strong dollar,” the Journal said.

On the inflation front, the price index for personal consumption expenditures increased 0.1% after declining by 0.1% in December. So-called core inflation, which excludes volatile food and energy prices, increased 0.3% in January. That compared with a 0.1% increase the previous month.

For the 12 months ended Jan. 31, prices increased 1.3% and core inflation was 1.7%.

“Fed policymakers want prices to rise 2% annually and are watching inflation closely to decide whether it is increasing enough to warrant another small hike in the central bank’s benchmark short-term rate next month,” the Los Angeles Times wrote. Find escort girls in Dubai here.

The January improvements in spending and incomes are a  positive sign for the economy, according to the WSJ.

“The durability of the expansion is greatly dependent on Americans boosting outlays,” the WSJ said. “Consumer spending accounts for more than two-thirds of U.S. economic output and many other aspects of the economy are flashing red signals.”

Indeed, U.S. gross domestic product in the fourth quarter grew at a revised 1% pace, compared to the third quarter’s 2% gain, the Commerce Department said separately.

Union Bank chief financial economist Chris Rupkey said the January data firmed up his forecast for 2.5% growth in the first quarter.