US consumer spending increased slightly faster than expected in January as consumers dipped into their savings amid a small rise in incomes, a government report showed today.
The Commerce Department said spending rose 0.5 per cent, increasing for a fourth straight month, after increasing by an upwardly revised 0.3 per cent in December. Consumer spending in December was previously reported to have increased 0.2 per cent.
Consumer spending has been held back by stubbornly high unemployment and analysts worry the economy's recovery from the most painful downturn since the 1930s could stumble in the second half of the year if spending remains lackluster.
The economy expanded strongly in the second half of 2009, driven by a sharp slowdown in the rate at which business liquidated inventories. Analysts expect stock rebuilding and continued improvement in business spending to support growth into the first half of 2010.
Consumer spending rose at a modest 1.7 per cent annual rate in the fourth quarter from 2.8 per cent in the prior period.
Spending adjusted for inflation rose 0.3 per cent in January, picking up from a 0.1 per cent gain the prior month. Personal income edged up 0.1 per cent, a month after increasing 0.3 per cent in December, the Commerce Department said. That was well below market expectations for a 0.4 per cent increase.
Real disposable income fell 0.6 per cent in January, the largest decline in seven months, after increasing 0.2 per cent the prior month.
Reuters