The U.S. January personal income report showed a surprising uptick in income related to the federal cost of living adjustment that was spent on nondurables, thereby boosting real consumption and altering the picture of a weak start to the first quarter. This is a classic and appropriate example of government stimulus taking effect to bolster the economy.
January personal income rose 0.4% in its largest gain since May, personal consumption expenditures printed up 0.6%, and core PCE prices printed a modest 0.1% higher for a 1.6% increase over the year. The report was better than expected in a rebound from weakness in November-December.
Weakness was seen in private wages and salaries, which fell $25.8 billion after tumbling $27.0 billion in December. The month’s income gains mainly reflected the federal cost of living adjustment for transfers and for federal civilian and military pay. Excluding special factors, including the COLA, the Commerce Department estimated income would have been up just 0.2%.
— Market News International