Americans’ personal income shot up 1.8% in January, the biggest increase in more than a year, while the pace of consumer spending was nearly flat after a strong gain in December, the government reported today.
The Commerce Department said income rose $74 billion to a seasonally adjusted annual rate of $4.28 trillion in January, following a 0.9% increase in December and a 0.2% drop in November.
January’s income gain was the biggest monthly increase since a 2% jump in October, 1987.
Personal consumption spending, meanwhile, edged up just 0.1% in January after a 0.8% gain in December and a 0.4% jump during November. The figures include virtually all consumer spending except interest payments on debt.
January’s 0.1% increase was the weakest performance for consumer spending since a 1.5% decrease last September.
The increase in income was paced by a 1.2% gain in the key component of wages and salaries, reflecting continued strong employment.
The recent income gains were bolstered by several special factors, including a 4.1% pay increase in January for federal civilian and military personnel, a 4% cost-of-living increase in Social Security benefits in January and a December increase in farm subsidy payments, the Commerce Department said.
But even excluding such special factors, personal income still increased 1.6% in January and 0.8% in December.
With the income gain strongly outpacing the rise in spending, the personal savings rate, savings as a percentage of disposable income, rose to 5.8% from 4.3% in December.