Consumer Spending Up Some, But Inflation Hits High

(CN) – Consumer spending was lethargic in January, despite a prevailing sense of optimism in the direction in which the economy is moving, the Commerce Department said Wednesday.

The government said consumer spending increased a sluggish 0.2 percent in January, after a 0.5 percent gain in December.

It attributed this to flat expenditures on services, and a decline in spending on durable goods, including household appliances and vehicles.

At the same time, inflation continued to rise, going up 0.4 percent in January. Overall, inflation has increased 1.9 percent in the past 12 months  — the biggest year-over-year gain in more than four years.

 

Leaving aside food and energy, which are considered highly volatile categories by economists, and therefore harder to rely on for analysis, core prices rose 0.3 percent in January and 1.7 percent in the past 12 months.

But all this comes at a time when consumers claim they’re generally optimistic about the future.

The Conference Board’s consumer confidence index, for instance surged to a 15-year high in February after a modest dip in the previous month.

Measures of consumer health are important for growth because consumer spending drives about 70 percent of economic activity.

Income growth also accelerated slightly in January, the data showed, rising 0.4 percent.

 

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