Spending up, savings down in US
March 1, 2006
Personal spending in the United States was up 0.9 percent in January, according to new data from the US Commerce Department, while personal income increased by only 0.7 percent in the month. The rise in spending was up a bit less than had been expected, while the increase in spending was somewhat more than expectations. Both figures increased more than they had since last summer, indicating that the US economy has gained new momentum after weak performance in the last quarter of 2005.
The rate of savings in the US, however, was down to minus 0.7 percent in January after having hit minus 0.4 percent in December. A minus reading in this category means that consumers are spending savings in order to make purchases. Analysts expect that as the housing market slows, energy prices decline, and income grows, personal savings will begin to increase.
Meanwhile, personal consumption expenditures (PCE) inflation was up 0.5 percent in January after holding steady in December. This meant that real spending growth was 0.4 percent in the month. The core rate, which excludes food and energy expenditures, was up only 0.2 percent, however. This meant that the core PCE in the year ending in January was up 1.8 percent, down from 1.9 percent in the year which ended in December. This meant that the Federal Reserve’s favored measure of inflation remained in their stated preferred zone of 1 percent to 2 percent.