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U.S. January Consumer Spending Breaks Losing Streak By Rising 0.6%
March 2, 2009 9:58 a.m. EST
Mayur Pahilajani - AHN News Writer
Washington, D.C. (AHN) - U.S. Consumer spending in the month of January surprisingly increased to the most since June 2008, with rising personal income and higher disposable income.
Consumer spending, which accounts for about 70 percent of GDP, increased by 0.6 percent, or $56.4 billion, at an annual rate in January less than estimated, compared to the decrease of 1.0 percent in December.
The market analysts had projected the consumer spending to increase by 0.4 percent on average basis.
Last week, the Commerce Department reported that the gross domestic product of world's largest economy contracted at a 6.2 percent annual rate in the fourth quarter, which is the lowest figure since 1982. In the same period, Consumer spending dropped by 4.3 percent.
"The trend in real consumption, however, remains downwards, and the further decline in consumers' sentiment signals continued declines," wrote Ian Shepherdson, an economist at High Frequency Economics, in a research note, according to CNN Money.
The Commerce Department's report today in Washington showed the gain in the U.S. consumer spending in the last month is an indication that residents in the country increased purchases of food and other nondurable items.
The report also showed that the measure of inflation eased to 0.7 percent higher, which moved down from 0.8 percent rise in the 12 months ending in December.
The core inflation, excluding food and energy prices for a better perspective on the underlying inflation, was higher by 1.6 percent from a year earlier, which is at the lowest level in the last five years.
The government reports said personal incomes gained by 0.4 percent, with real disposable personal income, which is the money left over after taxes, climbing by 1.5 percent in January.
In December, personal income decreased $24.0 billion, or 0.2 percent. The January change in personal income was boosted by several special factors.
Some of the factors contributing to higher income include pay raises for federal civilian and military personnel boosting government wage and salary disbursements and cost-of-living adjustments to several federal transfer payment programs boosting personal current transfer receipts.
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