Consumer spending rises 0.5 percent in Jan

By @ibtimes on

Consumer spending increased slightly faster than expected in January as consumers dipped into their savings amid a small rise in incomes, a government report showed on Monday.

The Commerce Department said spending rose 0.5 percent, increasing for a fourth straight month, after increasing by an upwardly revised 0.3 percent in December. Consumer spending in December was previously reported to have increased 0.2 percent.

Analysts polled by Reuters had expected consumer spending, which normally accounts for over two-thirds of U.S. economic activity, to increase 0.4 percent in January.

Consumer spending has been held back by stubbornly high unemployment and analysts worry the economy's recovery from the most painful downturn since the 1930s could stumble in the second half of the year if spending remains lackluster.

The economy expanded strongly in the second half of 2009, driven by a sharp slowdown in the rate at which business liquidated inventories. Analysts expect stock rebuilding and continued improvement in business spending to support growth into the first half of 2010.

Consumer spending rose at a modest 1.7 percent annual rate in the fourth quarter from 2.8 percent in the prior period.

Spending adjusted for inflation rose 0.3 percent in January, picking up from a 0.1 percent gain the prior month. Personal income edged up 0.1 percent, a month after increasing 0.3 percent in December, the Commerce Department said. That was well below market expectations for a 0.4 percent increase.

Real disposable income fell 0.6 percent in January, the largest decline in seven months, after increasing 0.2 percent the prior month.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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