Consumer spending in the U.S. rose in January even as incomes dropped by the most in 20 years, showing households were weathering the payroll-tax increase by socking away less money in the bank.
Household purchases, which account for about 70% of the economy, climbed 0.2% after a 0.1% gain the prior month, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg survey of 76 economists called for a 0.2% advance. Incomes slumped 3.6%, sending the saving rate down to the lowest level since November 2007.
The Bloomberg survey median called for incomes to fall 2.4%.
The slump in incomes in January was the biggest since January 1993 and followed a 2.6% jump in December. Some companies paid dividends and employee bonuses earlier than usual before tax rates went up this year, removing a gain usually seen in January. The Commerce Department estimated the January level of wages was reduced by about $15 billion U.S. and December was boosted by about $30 billion U.S., reflecting the timing of the bonuses.
The saving rate dropped to 2.4% from 6.4%.
