U.S Consumer Spending Rises After Fuel Drop

U.S Consumer purchases adjusted for inflation rose in January, a sign the plunge in gasoline prices is helping boost the biggest part of the U.S. economy.

The 0.3 percent increase followed a 0.1 percent drop the prior month, a Commerce Department report showed Monday in Washington. So-called nominal spending, which doesn’t take into account changes in price, declined 0.2 percent, more than estimated, while incomes grew 0.3 percent for a second month.

The best job market since 1999, low borrowing costs and cheaper fuel bills are driving household spending, which accounts for almost 70 percent of the economy. Consumption, having wrapped up its strongest quarterly performance in four years, may get further support as wages pick up and prices remain contained.

“There are many positives for the consumer right now, including strong job growth, lower gasoline prices and low interest rates,” Jennifer Lee, senior economist at BMO Capital Markets in Toronto, said before the report. “Demand is still looking healthy. Consumer spending should grow at a solid pace this quarter.”

Nominal spending was projected to fall 0.1 percent, according to the median forecast of 80 economists surveyed by Bloomberg. Forecasts ranged from a 0.3 percent decrease to a 0.5 percent increase.

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell