A new round of government stimulus controls saw personal income hit its largest monthly gain since April 2020, although inflation remained moderate, the Commerce Department reported Friday.
Personal income was up 10% after a 0.6% increase in December. That was even higher than the Dow Jones’ estimate of 9.5%.
The profit came from the issuance of $ 600 stimulus payments that Congress approved for millions of Americans, along with improved unemployment benefits. Consumers took those checks and issued them quickly, driving retail sales soaring and total spending for the month up 2.4%, slightly below the estimate of 2.5%.
The slightly softer-than-expected spending data came amid a drop in the personal savings rate to 20.5%, or $ 3.93 trillion. That was the highest level since May 2020.
However, all that spending has not added to inflationary pressures.
The price index for personal consumption expenditure, the Federal Reserve’s preferred inflation indicator, rose 0.3% this month, slightly higher than the 0.2% expectation, but rose only 1.5% year-on-year, corresponding with Dow Jones’ estimates. That number was the same for both headline rate and core, excluding volatile food and energy prices.
In September, the Fed even adopted an official policy of allowing inflation to rise above 2% before interest rates were raised.
However, the pandemic-related pressures have contributed to a general disinflationary environment that has led policymakers to say they will likely wait for years to come.
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