Consumer spending rose in January after falling for a record six straight months, pushed higher by purchases of food and other non-durable items, and a private measure of the nation's manufacturing sector contracted for the 13th straight month in February, but more slowly than expected.
The Commerce Department said Monday that consumer spending rose 0.6% in January, better than the 0.4% gain economists expected.
Personal incomes rose 0.4%, partly reflecting the cost-of-living adjustments provided to millions of Social Security recipients. Still, that was better than the 0.2% decline economists expected.
The personal savings rate surged to 5%, highest since 1995, as consumers continued to sock away more of their incomes.
"It is good that people save, but it is not good that everybody saves at the same time," said Scott Brown, chief economist, Raymond James & Associates. "That makes the current downturn more severe and long lasting."
Separately, the Institute for Supply Management said its manufacturing index rose to 35.8 from 35.6 in January. Analysts had expected a drop to 33.8.
A reading below 50 indicates the sector is shrinking. The index has fallen steadily since August as the economy has deteriorated, hitting a 28-year low of 32.9 in December.
The report showed manufacturers cutting jobs at a rapid pace while new orders are falling.
In a third report, construction spending plunged more than twice as much as expected in January, the fourth consecutive monthly decline. Non-residential activity fell by the largest amount in 15 years.
The Commerce Department said overall construction spending dropped 3.3% in January with weakness in all major categories of the building industry. Economists surveyed by Thomson Reuters expected a 1.5% drop in spending.
Residential construction fell 2.9% and non-residential activity dropped 4.3%, the biggest decline since January 1994.
The January spending increase was driven by a sharp 1.3% rise in purchases of non-durable goods, led by much higher spending on food. Durable goods posted a tiny 0.1% increase, as Americans again avoided spending on cars and other large items.
While the 0.6% increase in consumer spending was the largest since May, analysts do not expect the strength to continue. The cutback in consumer spending has been a key factor making this recession so severe. The government reported last week that the economy, as measured by gross domestic product, shrank at an annual rate of 6.2% in the final three months of 2008.
The economic weakness is keeping a lid on inflation. A price gauge tied to consumer spending showed a modest increase of 0.2% in January after three straight monthly declines that reflected sharp drops in energy costs. Excluding food and energy, the price gauge rose 0.1% in January and has risen only 1.6% the past 12 months.
Consumer spending, which accounts for about 70% of total economic activity, was falling at an annual rate of 4.3% during the fourth quarter.
The 0.4% increase in personal incomes followed two months of declines and was somewhat surprising in light of the massive layoffs this year. The country lost a net total of 598,000 jobs in January and the unemployment rate jumped to a 16-year high of 7.6%.
However, January incomes got a boost from the cost-of-living adjustment made to Social Security benefits and a pay raise given to federal civilian and military workers.
Sources: Associated Press, Reuters, USA Today
The Commerce Department said Monday that consumer spending rose 0.6% in January, better than the 0.4% gain economists expected.
Personal incomes rose 0.4%, partly reflecting the cost-of-living adjustments provided to millions of Social Security recipients. Still, that was better than the 0.2% decline economists expected.
The personal savings rate surged to 5%, highest since 1995, as consumers continued to sock away more of their incomes.
"It is good that people save, but it is not good that everybody saves at the same time," said Scott Brown, chief economist, Raymond James & Associates. "That makes the current downturn more severe and long lasting."
Separately, the Institute for Supply Management said its manufacturing index rose to 35.8 from 35.6 in January. Analysts had expected a drop to 33.8.
A reading below 50 indicates the sector is shrinking. The index has fallen steadily since August as the economy has deteriorated, hitting a 28-year low of 32.9 in December.
The report showed manufacturers cutting jobs at a rapid pace while new orders are falling.
In a third report, construction spending plunged more than twice as much as expected in January, the fourth consecutive monthly decline. Non-residential activity fell by the largest amount in 15 years.
The Commerce Department said overall construction spending dropped 3.3% in January with weakness in all major categories of the building industry. Economists surveyed by Thomson Reuters expected a 1.5% drop in spending.
Residential construction fell 2.9% and non-residential activity dropped 4.3%, the biggest decline since January 1994.
The January spending increase was driven by a sharp 1.3% rise in purchases of non-durable goods, led by much higher spending on food. Durable goods posted a tiny 0.1% increase, as Americans again avoided spending on cars and other large items.
While the 0.6% increase in consumer spending was the largest since May, analysts do not expect the strength to continue. The cutback in consumer spending has been a key factor making this recession so severe. The government reported last week that the economy, as measured by gross domestic product, shrank at an annual rate of 6.2% in the final three months of 2008.
The economic weakness is keeping a lid on inflation. A price gauge tied to consumer spending showed a modest increase of 0.2% in January after three straight monthly declines that reflected sharp drops in energy costs. Excluding food and energy, the price gauge rose 0.1% in January and has risen only 1.6% the past 12 months.
Consumer spending, which accounts for about 70% of total economic activity, was falling at an annual rate of 4.3% during the fourth quarter.
The 0.4% increase in personal incomes followed two months of declines and was somewhat surprising in light of the massive layoffs this year. The country lost a net total of 598,000 jobs in January and the unemployment rate jumped to a 16-year high of 7.6%.
However, January incomes got a boost from the cost-of-living adjustment made to Social Security benefits and a pay raise given to federal civilian and military workers.
Sources: Associated Press, Reuters, USA Today
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