Energy costs boosted US consumer spending in Jan.

Published on NewsOK Modified: March 3, 2014 at 10:42 am •  Published: March 3, 2014
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WASHINGTON (AP) — Americans spent more in January, but the increase came from a surge in spending on heating bills during the harsh winter. Spending in areas such as autos and clothing declined.

Spending rose 0.4 percent in January after a 0.1 percent gain in December the Commerce Department said Monday. The December figure was revised down from a 0.4 percent increase.

Income grew 0.3 percent in January after no increase in December.

The overall spending increase in January reflected a 0.8 percent jump in spending on services, the effect of higher heating bills. It was the biggest increase in spending on services since October 2001.

Spending on durable goods such as autos fell 0.3 percent. And spending on nondurable goods, covering things like clothing and food, dropped 0.7 percent.

"Spending looks great but is not," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. Without an 11.3 percent surge in spending on utility bills, Shepherdson said consumer spending would have been close to flat.

Consumer spending is closely watched because it drives about 70 percent of economic activity. On Friday, the government said the economy grew at a 2.4 percent annual rate in the October-December quarter, down sharply from an initial estimate of a 3.2 percent rate.

Analysts said the drop in spending on goods in January as bad weather kept people from shopping might also have held down spending in February.

"Given that the weather was unusually severe in February too, the outlook is more uncertain than usual," said Paul Dales, senior U.S. economist at Capital Economics.

The 0.3 percent rise in income was partly influenced by temporary factors, such as the start of health care coverage in several areas under the Affordable Care Act. But the expiration of benefits for some long-term unemployed people acted to reduce income. Without those special factors, income would have risen 0.2 percent in January, the government said.

Inflation as measured by a price gauge tied to consumer spending remained moderate. It rose 0.1 percent in January and has risen 1.2 percent over the past 12 months, well below the Federal Reserve's 2 percent target.