March 1, 2013
U.S. consumer spending rose in January as Americans spent more on services, with savings providing a cushion after income recorded its biggest drop in 20 years.
Income tumbled 3.6 percent, the largest drop since January 1993. Part of the decline was payback for a 2.6 percent surge in December as businesses, anxious about higher taxes, rushed to pay dividends and bonuses before the new year.
A portion of the drop in January also reflected the tax hikes. The income at the disposal of households after inflation and taxes plunged a 4.0 percent in January after advancing 2.7 percent in December.
The Commerce Department said on Friday consumer spending increased 0.2 percent in January after a revised 0.1 percent rise the prior month. Spending had previously been estimated to have increased 0.2 percent in December.
January’s increase was in line with economists’ expectations. Spending accounts for about 70 percent of U.S. economic activity and when adjusted for inflation, it gained 0.1 percent after a similar increase in December.
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