March 1 (Bloomberg) -- Spending by U.S. consumers increased in January for a
fourth consecutive month, a sign that the biggest part of the economy may
contribute more to growth in coming months.
The 0.5 percent increase in purchases was more than anticipated and followed a
0.3 percent gain in December that was larger than previously estimated,
Commerce Department figures showed today in Washington. Incomes climbed 0.1
percent, short of expectations and reflecting declines in dividends and
interest.
Retailers such as Home Depot Inc. and Macy’s Inc. are forecasting rising sales
this year, even as they don’t foresee a robust economic recovery. An
unemployment rate that’s projected to average 9.8 percent this year may
restrain household purchases, which account for about 70 percent of the
economy.
“It’s a good start” for the year, said Brian Bethune, chief financial
economist at IHS Global Insight in Lexington, Massachusetts, who correctly
forecast the increase in purchases. Still, he said, “consumption is not going
to be the driver” of economic growth.
Stock-index futures maintained earlier gains following the report. The
contract on the Standard & Poor’s 500 Index rose 0.3 percent to 1,106.3 at 8:50
a.m. in New York. Treasury securities were little changed.
Exceeds Forecast
The median estimate of 61 economists surveyed called for a 0.4 percent
increase in spending, after an originally reported gain of 0.2 percent the
prior month. Projections ranged from gains of 0.2 percent to 0.6 percent.
The increase in incomes followed a 0.3 percent advance in December. The median
forecast of economists surveyed anticipated a 0.4 percent gain. Wages and
salaries climbed 0.4 percent in January, the most since April, after increasing
0.1 percent the prior month. Interest payments fell 0.3 percent while dividends
declined 3 percent.
Disposable income, or the money left over after taxes, dropped 0.4 percent,
the largest decrease since July, reflecting an increase in federal non-withheld
income taxes.
Today’s report showed stable prices. The inflation gauge tied to spending
patterns rose 2.1 percent from January 2009, less than the 2.2 percent survey
median forecast.
The Federal Reserve’s preferred price measure, which excludes food and fuel,
was unchanged in January from the previous month and was up 1.4 percent from a
year earlier.
Adjusted for inflation, spending climbed 0.3 percent following a 0.1 percent
rise the prior month.
Because the increase in spending was larger than the gain in incomes, the
savings rate fell to 3.3 percent, the lowest level since October 2008, from 4.2
percent the prior month.
Broad-Based Gains
Inflation-adjusted spending on durable goods, such as autos, furniture, and
other long-lasting items, climbed 0.7 percent in January after rising 0.6
percent the prior month.
Purchases of non-durable goods increased 0.8 percent, and spending on
services, which account for almost 60 percent of all outlays, increased 0.1
percent.
The economy grew at a 5.9 percent annual rate in the fourth quarter, the
fastest pace in six years, figures from the Commerce Department showed last
week. Consumer spending slowed to a 1.7 percent pace, from 2.8 percent the
previous three months.
Home Depot is among companies projecting stronger sales.
“We recognize that we have more work to do as a company and that the economy
is not out of the woods yet, particularly in our market, so we’re not
projecting robust growth,” Home Depot Chairman and Chief Executive Officer
Frank Blake said on a Feb. 23 conference call with analysts.
To contact the reporter on this story: Timothy R Homan in Washington at
thom...@bloomberg.net
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