Consumer spending in the U.S. rose less than forecast in January after little change the previous month, showing a lack of improvement in the biggest part of the economy.
Purchases climbed 0.2 percent, while incomes increased 0.3 percent, Commerce Department figures showed today in Washington. The median estimate of economists surveyed by Bloomberg News called for a 0.4 percent increase in spending and a 0.5 percent rise in incomes. Warmer weather may have restrained spending on services such as utilities.
Households, whose spending accounts for about 70 percent of the world’s largest economy, may be reluctant to increase purchases as gas prices continue to climb and home prices keep falling. Bigger gains in employment and wages may be needed to give consumers the confidence to boost spending.
“We’ve seen some pressures on the household sector in terms of gasoline prices,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “It doesn’t look like things are falling apart, but things aren’t booming either.”
Projections for spending in the Bloomberg survey of 81 economists ranged from gains of 0.2 percent to 0.6 percent.
Fewer Americans unexpectedly filed first-time claims for unemployment insurance payments last week. Applications for jobless benefits decreased 2,000 in the week ended Feb. 25 to 351,000, matching a four-year low, the Labor Department said today.
Stock-index futures held gains after the figures. The contract on the Standard & Poor’s 500 Index expiring this month climbed 0.3 percent to 1,367.8 at 8:46 a.m. in New York.
Incomes climbed less in January than the previous month, when they rose 0.5 percent. Wages and salaries increased 0.4 percent in January for a second month.
Income after taxes and adjusted for inflation declined 0.1 percent in January after a 0.3 percent rise. It was the second decrease in the last three months. The drop in income helped push the savings rate down to 4.6 percent in January from 4.7 percent.
Adjusted for inflation, which are the figures used to calculate gross domestic product, consumer spending was little changed for a third month, today’s report showed.
Spending on services adjusted for changes in prices fell 0.1 percent in January after no change the previous two months. Purchases of durable goods climbed 0.9 percent after a 0.7 percent gain.
Income gains in the second half of 2011 were stronger than previously reported, the Commerce Department’s GDP showed yesterday. After-tax incomes adjusted for inflation increased at a 1.4 percent annual rate in the final three months of 2011, more than the previously reported 0.8 percent gain.
In the prior three months, incomes climbed 0.7 percent compared with a 1.9 percent slump that was initially reported. Wages and salaries from July through September rose $107.2 billion, up from the $24.8 billion gain initially reported. The economy expanded at a 3 percent annual pace in the final three months of 2011, compared with a 2.8 percent estimate. Household purchases rose at a 2.1 percent rate.
Today’s figures contrast with other gauges of spending. Retail sales in January advanced 0.4 percent after little change the prior month, according to Commerce Department figures last month. Merchants including Macy’s Inc., Gap Inc. and Target Corp. cut prices to attract more business during the holiday shopping season.
At the same time, consumers are becoming more optimistic. The Conference Board’s gauge in February increased to the highest level in a year. The Thomson Reuters/University of Michigan measure of consumer sentiment increased to 75.3 in February, the sixth straight monthly gain and the longest advance since 1997.
A firming labor market is lifting Americans’ spirits. The jobless rate dropped to 8.3 percent in January, and employers added 243,000 new workers, data from the Labor Department showed last month.
Still, that improvement is not fast enough for some companies like Cracker Barrel Old Country Store Inc.
“While recent employment data are moving in a favorable direction, the pace of improvement remains slow, and consumer spending is still being pressured by higher grocery and energy costs,” Sandra Cochran, chief executive officer of the Lebanon, Tennessee-based firm, said on a Feb. 21 conference call. “In response, many in the industry are focused on promotional discounting.”
Federal Reserve Chairman Ben S. Bernanke yesterday said that while there have been “positive developments” in the labor market, Bernanke said it “remains far from normal.”
“At present, with the unemployment rate elevated and the inflation outlook subdued, the committee judges that sustaining a highly accommodative stance for monetary policy is consistent with promoting both objectives” for stable prices and maximum employment, Bernanke said in testimony to the House Financial Services Committee in Washington.
He also said that a recent rise in gasoline prices “is likely to push up inflation temporarily” and reduce consumer purchasing power.