US consumer spending ticked up in January as incomes soared

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Consumers are feeling much more optimistic about the economy, which should help lift spending. Consumer confidence jumped in February to the highest level since 2000, according to the Conference Board.

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“With consumer confidence elevated and disposable incomes rising, we don’t expect the softness in spending to last long,” Paul Ashworth, chief U.S. economist at Capital Economics, said.

There were some signs of inflation pressures. A key inflation gauge that excludes the volatile food and energy categories rose 0.3 per cent, the most in a year and matching January 2017’s gain. The last time core prices rose faster was in January 2007.

Fears of rising inflation stemming from faster economic growth and a solid job market contributed to a sharp fall in the stock market in early February.

Yet core prices rose just 1.5 per cent in January from a year ago, the same annual gain as in December. A broader inflation measure that includes food and energy increased 1.7 per cent from a year earlier, also the same as the previous month. Both figures are below the Federal Reserve’s target of 2 per cent.

Americans spent much less on cars last month, reflecting a slowdown after consumers replaced thousands of cars in previous months that had been destroyed by hurricanes. That pulled down spending on long-lasting goods by 1.6 per cent, the steepest fall since last January.

Adjusted for inflation, Americans’ after-tax incomes rose 0.6 per cent in January, the most in two and a half years.

Overall, the economy and job market are mostly healthy. The number of Americans seeking unemployment benefits fell last week to 210,000, the lowest level in 48 years, the Labor Department said Thursday. That is a sign that employers anticipate solid growth and want to hold onto their staffs.

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This story has been corrected to show that after-tax, inflation-adjusted incomes rose the most in two and half years, rather than five years.

Christopher Rugaber, The Associated Press