US personal income is decreasing; lowest expenditure since 2009

WASHINGTON (Reuters) – US personal income declined for the first time in more than three years in January, as dividends and interest payments fell, suggesting moderate growth in consumer spending after the strongest decline since 2009 in December.

The report released Friday by the Commerce Department also indicated that inflationary pressures remained under control, which, combined with the slowdown in national and global economic growth, lent more credence to the Federal Reserve's "patient" stance on rising inflation. interest rate this year.

Personal income fell 0.1% in January, the first decline since November 2015, after jumping 1.0% in December. Revenues were weighed by lower dividends, farm owners' income and interest. Wages rose a slight 0.3% in January after rising 0.5% in December.

Economists polled by Reuters had forecast revenue up 0.3% in January.

The Commerce Department did not publish the January portion of the report devoted to consumer spending, as the collection and processing of retail sales data was delayed by a partial 35-day government closure that ended on 25 January.

Consumer spending, which accounts for more than two-thirds of US economic activity, fell by 0.5% in December. This is the largest decrease since September 2009 and follows a 0.6% increase in November.

Households reduced their purchases of motor vehicles and recreational goods in December, resulting in a 1.9% drop in spending on goods. Expenditure on goods rose 1.0% in November. Spending on services edged up 0.1%, dampened by lower spending on electricity and gas. Spending on services rose 0.4% in November.

After adjusting for inflation, consumer spending fell 0.6% in December, also the largest decline since September 2009, following a 0.5% gain in November.

December data were included in the fourth quarter gross domestic product report released on Thursday, which showed that consumer spending had increased 2.8% annualized over the period, a slowdown from robust pace of 3.5% of the third quarter. The economy grew 2.6% in the quarters from October to December, after a 3.4% pace in the third quarter.

US financial markets were little affected by the data.

OVERVOLTAGE OF ECONOMIES

The sharp deceleration in consumer spending in December led to a weaker growth trajectory for consumption in the first quarter and reinforced analysts' expectations of a slowing economy in the first three months of the year.

Nevertheless, consumer spending is likely to remain supported by a build-up of savings. In December, savings reached $ 1.2 trillion, the highest level since December 2012, up from $ 961.3 billion in November. The savings rate reached a record level of 7.6% in three years.

The economy is losing momentum because of the $ 1.5 trillion tax cut and lower public spending.

A trade war between the United States and China, rising interest rates, slowing global growth and the uncertainty surrounding Britain's exit from the European Union also have a negative impact on the economy. the economy.

Inflation was moderate in December. The price index of personal consumption expenditure, excluding unstable components of food and energy products, rose 0.2% after a similar gain in November. This left the year-on-year increase of 1.9% in the so-called CPI base price index.

The core PCE index is the measure of inflation favored by the Fed. It reached the 2% inflation target of the US central bank in March for the first time since April 2012.