U.S Consumer Spending Rises After Fuel Drop

U.S Consumer purchases adjusted for inflation rose in January, a sign the plunge in gasoline prices is helping boost the biggest part of the U.S. economy.

The 0.3 percent increase followed a 0.1 percent drop the prior month, a Commerce Department report showed Monday in Washington. So-called nominal spending, which doesn’t take into account changes in price, declined 0.2 percent, more than estimated, while incomes grew 0.3 percent for a second month.

The best job market since 1999, low borrowing costs and cheaper fuel bills are driving household spending, which accounts for almost 70 percent of the economy. Consumption, having wrapped up its strongest quarterly performance in four years, may get further support as wages pick up and prices remain contained.

“There are many positives for the consumer right now, including strong job growth, lower gasoline prices and low interest rates,” Jennifer Lee, senior economist at BMO Capital Markets in Toronto, said before the report. “Demand is still looking healthy. Consumer spending should grow at a solid pace this quarter.”

Nominal spending was projected to fall 0.1 percent, according to the median forecast of 80 economists surveyed by Bloomberg. Forecasts ranged from a 0.3 percent decrease to a 0.5 percent increase.

Bloomberg

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