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Consumer spending goes up even as income falls in January

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Income dropped in January by the most it has in 20 years

Despite the fact that income dropped in January by the highest percentage in 20 years, consumer spending actually increased, though modestly. Bloomberg has the story:

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 in Washington. 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.

Employment gains, the rebound in housing and growing demand for autos will probably keep supporting consumer spending in the first quarter as the world’s largest economy picks up from an end-of-year slowdown. Even so, rising gasoline prices and the need to rebuild nest eggs may make it difficult for households to match last quarter’s performance.
 

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