Consumer spending drops 0.2 percent in January

WASHINGTON (AP) — Consumer spending fell for a second consecutive month in January, weakness that was expected to be temporary. Income rose, reflecting strong job gains during the month.

Consumer spending declined 0.2 percent in January following a 0.3 percent drop in December, the Commerce Department reported Monday. Economists had expected a dip, reflecting a big drop in gas prices during the month. That decline should prove to be a positive for the economy, giving consumers more money to spend on other goods.

Income grew 0.3 percent in January as wages and salaries increased a strong $42.4 billion. Analysts expect that solid job gains and low unemployment will bolster consumer spending and lift economic growth this year to what they predict will be the fastest pace in a decade.

Consumer spending, after removing the impact of price changes, actually rose a solid 0.3 percent in January and after-tax income, after removing inflation, was up 0.9 percent. Paul Ashworth, chief U.S. economist at Capital Economics, said the surge in inflation-adjusted income showed the support households will be getting from falling energy prices.

“Even though households didn’t take full advantage of their savings on gasoline in January, they still have a lot of scope to increase real consumption in the first half of the year,” Ashworth said.

The combination of falling spending and rising income translated into an increase in the personal saving rate, which climbed to 5.5 percent of after-tax income, up from 5 percent in December and the highest level since late 2012.