Spring Break
Consumer spending rises in Jan., unlikely to last
Associated Press
Issue date: 3/2/09 Section: News
WASHINGTON (AP) - Consumer spending rose in January after falling for a record six straight months, pushed higher by purchases of food and other nondurable items. But the increase is expected to be fleeting given all the problems facing the economy.
A batch of fresh reports Monday showed little signs of an economic rebound, with nonresidential construction spending falling to its lowest level in more than a decade and manufacturing activity contracting for a 13th straight month.
On Wall Street, the Dow Jones industrial average plunged below 7,000 for the first time since Oct. 28, 1997, as investors grew pessimistic about the health of banks and the economy. The Dow - which lost about 220 points in afternoon trading and was heading toward 6,800 - last closed below 7,000 on May 1, 1997.
The Commerce Department report on consumers showed spending rose 0.6 percent in January, even better than the 0.4 percent gain that economists expected.
Personal incomes rose 0.4 percent in January, partly reflecting the cost-of-living adjustments provided to millions of Social Security recipients. Still, that was better than the 0.2 percent decline economists expected.
The personal savings rate surged to 5 percent, the highest level since 1995 as consumers continued to sock away more of their incomes amid the deepening recession.
The 0.6 percent rise in spending followed a record six straight declines, including a 1 percent drop in December when retailers endured their worst holiday shopping season in at least four decades.
The January increase was driven by a sharp 1.3 percent rise in purchases of nondurable goods led by much higher spending on food. Durable goods posted a tiny 0.1 percent increase, as Americans again avoided spending on cars and other large items.
While the 0.6 percent increase in consumer spending was the largest since May, analysts do not expect the strength to continue amid a recession that's already the longest in a quarter-century.
A batch of fresh reports Monday showed little signs of an economic rebound, with nonresidential construction spending falling to its lowest level in more than a decade and manufacturing activity contracting for a 13th straight month.
On Wall Street, the Dow Jones industrial average plunged below 7,000 for the first time since Oct. 28, 1997, as investors grew pessimistic about the health of banks and the economy. The Dow - which lost about 220 points in afternoon trading and was heading toward 6,800 - last closed below 7,000 on May 1, 1997.
The Commerce Department report on consumers showed spending rose 0.6 percent in January, even better than the 0.4 percent gain that economists expected.
Personal incomes rose 0.4 percent in January, partly reflecting the cost-of-living adjustments provided to millions of Social Security recipients. Still, that was better than the 0.2 percent decline economists expected.
The personal savings rate surged to 5 percent, the highest level since 1995 as consumers continued to sock away more of their incomes amid the deepening recession.
The 0.6 percent rise in spending followed a record six straight declines, including a 1 percent drop in December when retailers endured their worst holiday shopping season in at least four decades.
The January increase was driven by a sharp 1.3 percent rise in purchases of nondurable goods led by much higher spending on food. Durable goods posted a tiny 0.1 percent increase, as Americans again avoided spending on cars and other large items.
While the 0.6 percent increase in consumer spending was the largest since May, analysts do not expect the strength to continue amid a recession that's already the longest in a quarter-century.
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