Incomes rise 0.3% partly because of Obamacare-related subsidies
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — Consumers boosted spending in January, but a good chunk of the money went to pay higher utility bills during an unusually cold winter, according to government data released Monday.
Spending rose a seasonally adjusted 0.4% last month, or twice as much as Wall Street expected, the Commerce Department said Monday. Economists polled by MarketWatch had expected a 0.2% increase.
Higher spending in January, however, was offset by slower outlays in December and November than previously reported. The government said spending rose just 0.1% in December instead of 0.4%, while November’s increase was lowered a tick to 0.5%.
The pace of spending suggests little change in the trajectory of the U.S. economy, whose growth is largely dependent on the habits of consumers. They account for more than two-thirds of the nation’s economic activity.
Consumer spending has been erratic since the recession ended in mid-2009. Stretches of strong spending have usually been followed by lulls as Americans shored up their savings. The savings rate was unchanged last month at 4.3%.
The average incomes of Americans, meanwhile, climbed 0.3% last month. The gain was driven by pay raises for military personal and government employees, an annual cost-of-living raise for Social Security recipients and higher subsidies for health care related to the advent of the Affordable Care Act.
Inflation in January as measured by the personal consumption expenditure price index rose 0.1% on both an overall and core basis excluding food and energy. Over the past 12 months, the PCE index has risen a scant 1.2%.
Jeffry Bartash is a reporter for MarketWatch in Washington.
