A report released by the Commerce Department on Thursday showed U.S. personal income increased by slightly more than expected in the month of January, while personal spending rose in line with estimates.
The Commerce Department said personal income climbed by 0.4 percent in January, matching the increase seen in December. Economists had expected income to rise by 0.3 percent.
The bigger than expected increase in income included $30 billion to account for bonuses paid out in the wake of the corporate tax cuts.
“Apparently, the sum was estimated using ‘news reports,'” said Paul Ashworth, Chief U.S. Economist at Capital Economics. “So now the official stats include anecdata. Great.”
Disposable personal income, or personal income less personal current taxes, jumped by 0.9 percent in January after increasing by 0.4 percent in December.
Additionally, the report said personal spending edged up by 0.2 percent in January after climbing by an upwardly revised 0.4 percent in December.
Personal spending had been expected to rise by 0.2 percent compared to the 0.3 percent increase originally reported for the previous month.
Real spending, which is adjusted to remove price changes, slipped by 0.1 percent in January after rising by 0.2 percent in December.
“Overall, with consumer confidence elevated and disposable incomes rising, we don’t expect the softness in spending to last long,” Ashworth said. “Assuming it rebounds, rising inflationary pressures will keep the Fed hiking interest rates.”
A reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth held at 1.5 percent in January.
With income rising by more than spending, the report said personal saving as a percentage of disposable income surged up to 3.2 percent in January from 2.5 percent in December.