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 percent of the economy, climbed 0.2 percent after a 0.1 percent gain the prior month, a Commerce Department report showed today inWashington. The median estimate in a Bloomberg survey of 76 economists called for a 0.2 percent advance. Incomes slumped 3.6 percent, sending the saving rate down to the lowest level since November 2007.
The slump in incomes in January was the biggest since January 1993 and followed a 2.6 percent 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 and December was boosted by about $30 billion, reflecting the timing of the bonuses.
The saving rate dropped to 2.4 percent from 6.4 percent.