Consumer Spending Reverses Trend, Rises in January

Washington, DC, March 2, 2009--Consumer spending rose in January after falling for a record six straight months, on increased purchases of food and other nondurable items.

The Commerce Department said Monday that consumer spending rose 0.6 percent in January, even better than the 0.4 percent gain that economists expected.

Personal incomes rose 0.4 percent in January, partly reflecting the cost-of-living adjustments provided to millions of Social Security recipients. Still, that was better than the 0.2 percent decline economists expected.

The personal savings rate surged to 5 percent, the highest level since 1995 as consumers continued to sock away more of their incomes amid the deepening recession.

The 0.6 percent rise in spending followed a record six straight declines, including a 1 percent drop in December, when retailers endured their worst holiday shopping season in at least four decades.

Durable goods posted a 0.1 percent increase, as Americans again avoided spending on cars and other large items.

Consumer spending, which accounts for about 70 percent of total economic activity, was falling at an annual rate of 4.3 percent during the fourth quarter, the biggest drop since the second quarter of 1980.

The 0.4 percent increase in personal incomes followed two months of declines.