Article / 03 March 2014 at 14:15 GMT

US consumer spending climbs, drives economy higher

• US personal income, spending both rise in January
• Spending outstrips income as Americans dig into savings
• Q1 GDP growing at 2% on quarter annualised

By Mads Koefoed

Bottom line: Personal income and spending climbed 0.3 and 0.4 percent in January while inflationary pressures remained subdued. First-quarter GDP is currently running at about 2 percent quarter-on-quarter annualised.

US personal income and spending

Details: Consumers saw a welcome increase in income in January, which rose 0.3 percent on December. Wages and salaries gained 0.2 percent while disposable income climbed 0.4 percent and so too did personal spending (December spending was revised down to a small increase of just 0.1 percent from 0.4 percent initially). This implies an unchanged saving rate of 4.3 percent. However, adjusting for price increases and transfer receipts, the report was less impressive with the latter flat while spending rose 0.3 percent.

Turning to the price indices, the personal consumption expenditures (PCE) deflator gained 0.1 percent month-on-month, which sent it a tad higher at 1.2 percent year-on-year, above both expectations and the prior reading of 1.1 percent. The core PCE index also rose 0.1 percent, but declined to 1.1 percent year-on-year in line with expectations from 1.2 percent in December. This latter index ranks among the Federal Reserve's favourites when it comes to measuring inflation.

Q1 GDP running at 2 percent: Available reports for the first quarter indicate that the US economy is growing at around 2 percent annualised (ann.) in the current quarter so far. On an inflation-adjusted basis, personal income may be up just 0.4 percent (ann.) in January compared with Q4 but personal spending is up 2.4 percent (ann.). In Q4, the latter rose 2.5 percent (ann.), according to last week's second report on Q4 GDP.

Mads Koefoed is head of macro strategy at Saxo Bank. Follow all of Mad's commentary on our online social trading platform

5y
Ann Smith Ann Smith
The economical situation in the country is awful today. People are poor. They don’t have money for buying necessary thing. Government has to change something. We don’t have money for paying taxes. Some people take <a href="http://installmentcredits.com/">immediate processing of installment loans applications</a> for paying taxes or simply for paying their debts. Unfortunately our government doesn’t pay attention for simple people who live in this country.

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