Consumer Spending Rises Despite Inflation, End of Aid

What Friday’s Economic Reports Tell Us

Cropped shot of young Asian woman carrying a shopping basket, standing along the dairy aisle, reading the nutrition label on a bottle.
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Consumer prices continued to rise and household income was flat in January—but that didn’t deter spending, which rose the most since March, the government said Friday.

Here’s a quick look at the most significant economic indicators of the day and what they tell us.

Inflation 

  • The Federal Reserve’s preferred measure of inflation showed consumer prices continued to accelerate, rising 6.1% in the year through January—up from 5.8% in the year through December and marking a fresh high since 1982. Excluding food and energy costs—which are prone to large swings—the inflation rate rose to 5.2% from 4.9%, the Personal Consumption Expenditure (PCE) price index showed. 
  • The other popular measure of inflation, the Consumer Price Index, already showed an acceleration in January, and the PCE reading was no surprise to economists. Closely watched by the Fed, the data is likely to reinforce for the central bank that it needs to raise its benchmark interest rate to fight inflation, economists said.

Personal Income and Spending

  • Consumers ramped up their shopping in January, and it wasn’t just because of the price increases we’ve all experienced. Spending increased 2.1%—more than the 1.6% expected by economists—but even after inflation was taken into account, it rose a healthy 1.5%, the Bureau of Economic Analysis said. The majority of the increase was on goods including cars and recreational items, rather than services. 
  • The biggest monthly jump in consumer spending since March of last year more than made up for a decline in December, even though overall income stayed flat. While government benefits declined because the government’s expansion of the child tax credit expired at the end of the year, wages went up amid high demand for workers, and Social Security recipients got a cost-of-living increase.
  • Almost no change in income and more spending meant less money going into the piggy bank, as the savings rate as a share of disposable income fell to 6.4%, the lowest rate since 2013.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Bureau of Economic Analysis. “Personal Income and Outlays, January 2022.”

  2. BMO Economics. “Solid Wages & Salaries Boost Spending.”

  3. FRED Economic Data. “Personal Savings Rate.”

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