A new round of government business reviews brought personal income to the largest monthly gain since April 2020, despite inflation remaining low, the Commerce Department reported on Friday.
Personal income rose 10% from a 0.6% increase in December. That was even higher than the Dow Jones estimate of 9.5%.
The gain resulted from the issuance of $ 600 stimulus payments that Congress approved for millions of Americans, as well as an increase in unemployment benefits. Consumers took these checks and quickly issued them. Retail sales rose and total spend rose 2.4% for the month, a touch below the estimate of 2.5%.
The somewhat softer than expected spending data went back to a bankruptcy of the personal savings rate to 20.5% or 3.93 trillion US dollars. That was the highest level since May 2020.
However, none of this spending could add to inflationary pressures.
The consumer spending index, the Federal Reserve’s preferred inflation indicator, rose 0.3% over the month, slightly above expectations of 0.2%. However, it rose only 1.5% year-on-year and was in line with Dow Jones estimates. That number was the same for both the base rate and the core, excluding volatile food and energy prices.
In September the Fed even passed official policy that inflation could rise for more than 2% before interest rates hike.
Pandemic-related pressures, however, have contributed to an overall disinflationary environment that has led policy makers to believe that they are likely to be on hold for years.
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