With an increase in compensation largely offset by a decrease in government benefits, the Commerce Department released a report on Friday showing U.S. personal income was virtually unchanged in the month of January.
The Commerce Department said personal income inched up by less than a tenth of a percent in January after rising by an upwardly revised 0.4 percent in December.
Economists had expected personal income to dip by 0.3 percent compared to the 0.3 percent increase originally reported for the previous month.
Disposable personal income, or personal income less personal current taxes, crept up by 0.1 percent in January following a 0.2 percent uptick in December.
Excluding price changes, however, real disposable income fell by 0.5 percent in January after dipping by 0.3 percent in the previous month.
Meanwhile, the report showed personal spending spiked by 2.1 percent in January after falling by a downwardly revised 0.8 percent in December.
Personal spending was expected to jump by 1.5 percent compared to the 0.6 percent decrease originally reported for the previous month.
Real personal spending, which excludes price changes, shot up by 1.5 percent in January following a 1.3 percent slump in December.
Reflecting the jump in spending, personal saving as a percentage of disposable income tumbled to 6.4 percent in January from 8.2 percent in December.
“The reacceleration in consumption indicates the economy started the year on a stronger foundation,” said Lydia Boussour, Lead U.S. Economist at Oxford Economics. “And the rapid improvement in the public health situation has set the stage for robust consumption growth ahead, with the rotation of spending towards services likely to regain some traction.”
He added, “Yet, ever higher inflation and financial market turbulence triggered by the Russia-Ukraine conflict could temper consumers’ willingness and ability to spend.”
A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth accelerated to 5.2 percent in January from 4.9percent in December.
The annual rate of core consumer price growth slightly exceeded the 5.1 percent expected by economists, reaching the highest level since April 1983.
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