WASHINGTON (AFP) –
US consumer spending in January ticked up for the first time in seven months as income got a boost from falling taxes in the midst of deepening recession, government data showed Monday.
The Commerce Department reported consumer spending rose a seasonally adjusted 0.6 percent in January, beating analysts' consensus forecast of a 0.4 percent gain.
Battered US consumers' revived appetite had been foreshadowed by a surprise 1.0 percent rebound in January retail sales.
In December, consumer spending, which accounts for two-thirds of US economic activity, had fallen for the sixth consecutive month, by 1.0 percent. Over the June-December period consumer spending dropped 3.5 percent.
On an annual basis, consumer spending in January was 1.6 percent lower.
Excluding price changes, consumer spending rose 0.4 percent in January, the steepest increase since December 2006, after falling 0.5 percent in December.
Personal income rose 0.4 percent in January, double the 0.2 percent gain in December but trailing the rise in spending.
In the first month of the year, Americans found more cash in their pockets as personal disposable income -- income after taxes are paid -- vaulted 1.7 percent.
But the income gains were largely due to pay raises and adjustments for the federal government's civilian and military employees and a 95 percent plunge in personal current taxes amid the sharply shrinking economy.
Excluding special factors, personal income increased 0.2 percent in January, after falling 0.3 percent in December.
Nigel Gault, chief US economist at IHS Global Insight, warned the uptick was no sign of a rebound.
"Do not be fooled by the rise in incomes and consumption this month. Household wealth continues to fall rapidly, employment is falling steeply, and consumer sentiment is at or near all-time lows," Gault said.
"These are not the ingredients of a consumer recovery," he added.
Economist Sal Guatieri at BMO Capital Markets noted that US consumers had gotten a break from lower income taxes.
"The surprisingly strong start to the year, though unlikely to be sustained in coming months, should cushion the economic downturn in the first quarter following the largest pullback since 1982," he said.
The government on Friday reported gross domestic product, the measure of goods and services produced in the country, shrank a startling 6.2 percent in the fourth quarter, the sharpest contraction since 1982.
Analysts said the stronger-than-anticipated contraction indicated the US economy entered the year far weaker than expected.
With the world's largest economy sinking into a second year of recession, Americans continued to reverse decades of intense credit-fuelled spending to save.
Personal saving -- disposable personal income less personal spending -- vaulted 5.0 percent in January after a 3.9 percent rise in December. In August, a month before the financial crisis accelerated with the collapse of Wall Street investment bank Lehman Brothers, it was 0.8 percent.
Households had not saved so much of their monthly disposable income since March 1995. The 545.5 billion dollars squirrelled away was the highest since the Commerce Department began tracking the data in 1959.
The price index linked to personal consumption expenditures (PCE), used as an inflation bellwether for Federal Reserve monetary policy, rose 0.2 percent January after three straight months of decline, including a half-point drop in December.
The PCE index, excluding volatile food and energy prices, edged up 0.1 percent after three months of stability.
On a 12-month basis, the inflation indicator fell 0.7 percent and the core number dropped 1.6 percent.