By Eric Morath and Paul Kiernan
WASHINGTON-Household income rose solidly in January and consumer spending edged higher, while inflation remained in check, signs of stability for the U.S. economy at the start of the year.
Personal-consumption expenditures, or household spending, rose a seasonally adjusted 0.2% in January from December, the Commerce Department sa id Friday. Personal income advanced 0.6% last month, the largest gain in 11 months. Economists surveyed by The Wall Street Journal expected a 0.2% increase in spending and a 0.4% gain in personal income.
Friday's data reflects income, spending and prices measured in January, before heightened concerns about the coronavirus caused U.S. officials to issue warnings.
Gains in income and spending came against the backdrop of still-modest inflation pressures. The price index for personal consumption expenditures, the Federal Reserve's preferred inflation gauge, rose 0.1% on the month and was up 1.7% from a year earlier.
Year-over-year price gains have edged up in the past two months, reflecting higher energy costs than in early 2019. The annual increase in the personal-consumption-expenditures price index was 1.5% in December and 1.3% in November.
Still, inflation is running below the Fed's 2% target, and January's data suggested the recent acceleration could prove temporary. The coronavirus outbreak in China and other countries has eased global demand for oil and other goods in recent weeks.
Crude oil prices dipped below $50 a barrel this week from more than $60 a barrel in early January.
The core personal consumption expenditures index, which excludes often-volatile prices for food and energy, was up 0.1% on the month and rose 1.6% in January from a year earlier.
The January gain in incomes was broad based. Wages and salaries increased 0.5% from the prior month, which reflects both the minimum wage increasing in 21 states to start the year and a tight labor market putting some upward pressure on wages across the income spectrum. Meanwhile, government payments rose 1.6% in a month Social Security benefits increased. Personal dividend income rose 1.1% in January.
Americans' increased outlays on long-lasting durable goods by 0.6% in January. Households reduced spending on other goods but increased spending on services, such as healthcare, by 0.3%.
January's rise in spending was at a slower rate than the upwardly revised 0.4% increase in December. Consumer spending accounts for two-thirds of total U.S. economic output, and was viewed as a key support last year for the broader economy, which grew at a 2.1% rate in the fourth quarter of 2019, the Commerce Department said Thursday.
Whether the economy can maintain that rate of growth will largely depend on whether consumers remain willing to spend. Stock market gyrations and concerns about the coronavirus could impact consumers' confidence in the short term, but for all of 2020, economists expect the economy to grow at a similar rate as in 2019. The Conference Board's measure of consumer confidence for February, released Tuesday, rose slightly from January.
Write to Eric Morath at email@example.com and Paul Kiernan at firstname.lastname@example.org.