Personal Income Increased 0.7% During January --- Rise Exceeded Gain of 0.5% In Consumer Spending, But Fed Remains Wary
WASHINGTON -- Reversing a recent trend, consumers' incomes rose faster than their spending in January. But Americans are still reaching for their wallets more than Federal Reserve decision makers would like.</br></br>Personal income jumped 0.7% last month while consumer spending rose 0.5%, the Commerce Department said. Adjusted for inflation, core consumer spending inched up just 0.3%. Inflation, as measured by the personal consumption expenditures index, was unchanged at 0.2%. The savings rate bounced back to 1.4% after hitting a record low of 1% in December.</br></br>The numbers, which suggest Americans are thinking twice about some purchases, represent an about-face from December when personal income grew just 0.3% and consumer spending surged a revised 1.1%. Core consumer spending climbed 0.9%.</br></br>The increase in personal income, which includes wages, interest and government benefits, was boosted by pay increases for federal civilian and military personnel, agricultural subsidies, and cost-of-living adjustments for Social Security and other programs. Excluding the special factors, such as a 1.3% rise in government wage expenditures, the largest monthly gain since January 1993, income would have advanced 0.6%.</br></br>Still, consumer spending, an important driver of the nation's economy, shows few real signs that it's easing up. If January's gain in core spending repeats itself in February and March, spending in the first quarter would increase at a 5.8% annual rate, a hair under the robust 5.9% pace recorded at the end of last year.