WASHINGTON – Personal consumption increased 0.2% in January as income rose 1.0%, the largest gain in 20 months, the Commerce Department reported Monday.
Core PCE, which excludes food and energy costs and is the Federal Reserve’s preferred measure of inflation, increased 0.8% in January from the year earlier and was revised higher for December to a 0.8% rise from a 0.7% gain. The figure is still a record low on data stretching back to 1960.
The monthly PCE gain was the smallest since June. The core PCE rose 0.1% in January.
Economists expected incomes and expenditures would both rise 0.4% for the month, according to the median estimate from Thomson Reuters. The core PCE rate was expected to gain 0.1%.
Disposable personal income increased 0.7% in January and were aided partially by the extension of the Bush tax cuts. Excluding the tax cut extension, and the Making Work Pay provision in the American Recovery and Reinvestment Act, which expired on Dec. 31, disposable incomes increased 0.1% in January.
The Making Work Pay provision had held down withheld federal income taxes. The income taxes increased by $38.6 billion in January.
The personal savings rate, disposable personal income minus personal outlays, increased to $667.2 billion in January, the highest level since August.
In 2010, personal consumption increased 3.5%, rebounding from a 1.0% decline in 2009, which was the largest consumption contraction since 1938.
