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.

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