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, which covers things like clothing and food, dropped
0.7 percent.
"Spending looks great but is not," said Ian
Shepherdson, who noted the jump in temporary weather-related energy
demand. Without an 11.3 percent jump in spending on utility bills,
Shepherdson said consumer spending would have been close to flat.
Consumer
spending is closely watched because it drives 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.
Most of the revision
reflected a lower estimate for consumer spending, which grew at an
annual rate of 2.6 percent during the quarter. That was down from an
initial estimate of a 3.3 percent annual rate.
Part of the
downward revision in spending reflected lower sales of autos and lower
spending for non-durable goods than first thought. Analysts said the
severe weather that hit much of the country was to blame for those
reductions. Most think the harsh weather will also limit growth in the
current January-March quarter.
Economists generally think overall
growth this quarter will dip to an annual rate of around 2 percent. But
they still foresee a rebound beginning in the April-June quarter and for
the rest of the year. They expect that contained employment gains and a
lessening of last year’s drag of higher taxes and federal spending cuts
will support growth this year.
Many forecast that the overall
economy will grow at a solid 3 percent annual rate this year, up from
1.9 percent growth in the gross domestic product last year. That would
be the best performance since the recession ended nearly five years ago.
But
before growth rebounds, the economy must endure a soft patch caused by
winter weather and decisions by companies to work down a buildup in
their stockpiles before they step up spending again.
Once warmer
weather arrives, many analysts expect a burst of spending caused by
pent-up demand from consumers who put off spending for big-ticket items
like autos during winter.
Federal Reserve Chair Janet Yellen
testified to Congress last week that the Fed still expects the economy
to strengthen this year. But she told the Senate Banking Committee that
the Fed will be studying the data to make sure the slowdown is just a
temporary weather phenomenon.
The Fed is gradually reducing its
monthly bond purchases, which have been intended to keep long-term loan
rates low to encourage spending and growth.
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