Infographics Graphic

Article

U.S. consumer spending rises, but increase expected to be "fleeting"

0 30 Economic

by Daily Commercial News

U.S. consumer spending rose in January after falling for a record six straight months, pushed higher by purchases of food and other non-durable items. But the increase is expected to be fleeting given all the problems facing the American economy.

WASHINGTON

U.S. consumer spending rose in January after falling for a record six straight months, pushed higher by purchases of food and other non-durable items. But the increase is expected to be fleeting given all the problems facing the American economy.

The U.S. Commerce Department said Monday that consumer spending rose 0.6 per cent in January, even better than the 0.4 per cent gain that economists expected.

Personal incomes rose 0.4 per cent in January, partly reflecting the cost-of-living adjustments provided to millions of Social Security recipients. Still, that was better than the 0.2 per cent decline economists expected.

The personal savings rate surged to five per cent, the highest level since 1995 as consumers continued to sock away more of their incomes amid the deepening recession.

The 0.6 per cent rise in spending followed a record six straight declines, including a one per cent drop in December when retailers endured their worst holiday shopping season in at least four decades.

The January increase was driven by a sharp 1.3 per cent rise in purchases of non-durable goods led by much higher spending on food. Durable goods posted a tiny 0.1 per cent increase, as Americans again avoided spending on cars and other large items.

While the 0.6 per cent increase in consumer spending was the largest since May, analysts do not expect the strength to continue amid a recession that’s already the longest in a quarter-century.

The department also reported that construction spending dropped 3.3 per cent in January, more than twice as much as economists expected. Residential construction fell 2.9 per cent and non-residential activity dropped 4.3 per cent, the biggest decline since January 1994.

The economic weakness is keeping a lid on inflation. A price gauge tied to consumer spending showed a modest increase of 0.2 per cent in January after three straight monthly declines that reflected sharp drops in energy costs. Excluding food and energy, the price gauge rose 0.1 per cent in January and has risen only 1.6 per cent in the last 12 months.

Consumer spending, which accounts for about 70 per cent of total economic activity, was falling at an annual rate of 4.3 per cent during the fourth quarter, the biggest drop since the second quarter of 1980.

The 0.4 per cent increase in personal incomes followed two months of declines and was somewhat surprising in light of the massive layoffs that have occurred this year. The country lost a net total of 598,000 jobs in January and the unemployment rate jumped to a 16-year high of 7.6 per cent.

Associated Press

Leave a comment

Or register to be able to comment.

Copyright ConstructConnect TM. All rights reserved. "ConstructConnect" is a dba for CMD Holdings.
The following rules apply to the use of this site:
Terms of Use and Privacy Statement