U.S. consumer spending surges in January
STORY: No signs of a slowdown in the U.S. economy, at least based off government data out Friday (February 24).
Consumer spending increased by the most in nearly two years in January as wage gains surged. Also, inflation accelerated, adding to financial market fears that the Federal Reserve could continue raising interest rates through summer.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, shot up 1.8% last month. That was the largest increase since March 2021, while December’s figure was revised slightly higher.
Consumers boosted purchases of long-lasting manufactured goods like cars, home goods, and equipment. They also spent more on restaurants and recreation.
The report from the Commerce Department was the latest indication that the economy did not appear on the edge of a much-dreaded recession. It joined data earlier this month showing robust job growth in January and the lowest unemployment rate in more than 53 years.
One chief economist told Reuters this report means that the Fed will likely continue hiking rates into the summer.
On the inflation front, the personal consumption expenditures or PCE price index shot up 0.6% last month, the largest increase since June 2022. The core rate excluding food and energy prices also rose 0.6%. The Fed tracks the PCE price indexes in setting monetary policy.