Your Economy (No Politics)

[Bullwinkle]

US January consumer spending surges, saving dips
Wednesday 1 March 2006, 8:30am EST


WASHINGTON, March 1 (Reuters) - U.S. consumer spending surged 0.9 percent in January, just below market expectations, as shoppers spent all their income and dipped into savings despite a pickup in inflation, a government report showed on Wednesday.

The Commerce Department said personal income grew 0.7 percent in January, the biggest gain since September and above Wall Street forecasts for a 0.6 percent rise.

But consumers spent even faster, notching the largest spending increase since July, producing a -0.7 percent saving rate. It was the third straight month in which Americans have tapped savings to finance their spending. The personal saving rate - the proportion of money Americans sock away - has not been above zero since March 2005.

The report also showed a pickup in inflation. The price index for consumer spending rose 0.5 percent in January after being unchanged in December. When volatile food and energy costs are stripped out, the so-called core PCE price index rose a milder 0.2 percent, in line with forecasts, up from a 0.1 percent increase the month before.

Over the last 12 months, inflation increased to 3.1 percent from 2.8 percent in December, while core prices rises moderated slightly, to a 1.8 percent increase from 1.9 percent the previous month.

The Federal Reserve has raised short-term interest rates 14 times since June 2004 in an effort to keep a lid on inflation, and policy-makers are expected to raise rates again later this month.

http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nN28193048&im...