Personal Income Posts Largest Drop in 20 Years as Consumer Spending Edges Higher

Friday, 01 Mar 2013 08:36 AM

 

  Comment  |
   Contact  |
  Print  
|  A   A  
  Copy Shortlink

U.S. consumer spending rose in January as Americans spent more on services, with savings providing a cushion after income recorded its biggest drop in 20 years.

The Commerce Department said on Friday consumer spending increased 0.2 percent in January after a revised 0.1 percent rise the prior month. Spending had previously been estimated to have increased 0.2 percent in December.

January's increase was in line with economists' expectations. Spending accounts for about 70 percent of U.S. economic activity and when adjusted for inflation, it gained 0.1 percent after a similar increase in December.

Though spending rose in January, it was supported by a rise in services, probably related to utilities consumption. Spending on goods fell, suggesting some hit from the expiration at the end of 2012 of a 2 percent payroll tax cut. Tax rates for wealthy Americans also increased.

The impact is expected to be larger in February's spending data and possibly extend through the first half of the year as households adjust to smaller paychecks, which are also being strained by rising gasoline prices.

Economists expect consumer spending in the first three months of this year to slow down sharply from the fourth quarter's 2.1 percent annual pace.

Income tumbled 3.6 percent, the largest drop since January 1993. Part of the decline was payback for a 2.6 percent surge in December as businesses, anxious about higher taxes, rushed to pay dividends and bonuses before the new year.

A portion of the drop in January also reflected the tax hikes. The income at the disposal of households after inflation and taxes plunged a 4.0 percent in January after advancing 2.7 percent in December.

With income dropping sharply and spending rising, the saving rate - the percentage of disposable income households are socking away - fell to 2.4 percent, the lowest level since November 2007. The rate had jumped to 6.4 percent in December.

Savings were the smallest since December 2007.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

© 2014 Thomson/Reuters. All rights reserved.

  Comment  |
   Contact  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

US Economic Growth Off to Slow Start in Fourth Quarter

Wednesday, 26 Nov 2014 17:00 PM

Growth in the world's largest economy got off to a slower start in the fourth quarter as U.S. consumer spending, equipme . . .

Fewer New Homes Sold in October Than Economists Had Forecast

Wednesday, 26 Nov 2014 11:04 AM

New homes in the U.S. sold at a slower pace than forecast in October as builders focused on meeting demand at the upper  . . .

Consumer Confidence Declines From Seven-Year High on Jobs Outlook

Wednesday, 26 Nov 2014 10:43 AM

Consumer confidence unexpectedly declined in November from a seven-year high as Americans became less upbeat about the e . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved