US incomes edge up as inflation accelerates in January: govt
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US incomes edge up as inflation accelerates in January: govt
Americans saw their incomes climb slightly in the first month of 2022, but the gain was overtaken by rising prices, which increased at their fastest rate in 40 years, according to government data released Friday.
Rising energy prices continue to be a key factor driving inflation and global oil prices have been moving steadily higher in recent days following Russia's invasion of Ukraine, which could disrupt supply.
The end of the monthly Child Tax Credit payments provided to American families during the pandemic was expected to result in lower personal income in January, but instead incomes rose $9 billion, or less than 0.1 percent, the Commerce Department reported.
Meanwhile, spending on goods and services rebounded after a drop in December, with personal consumption expenditures (PCE) jumping 2.1 percent, a bigger increase than economists had forecast.
The gain in incomes again was surpassed by inflation, as the PCE price index rose 0.6 percent compared to December.
Energy prices surged nearly 26 percent compared to January 2020, pushing the price index up 6.1 percent in the latest 12 months, the fastest pace since February 1982, the report said.
Even excluding volatile food and energy prices, the index gained 5.2 percent.
The PCE price index is closely watched since it is the preferred inflation measure of the Federal Reserve, which has signaled plans to begin raising interest rates next month for the first time since the pandemic began to tamp down rising prices.
The increased spending on goods was led by the continued rise in autos, while within services, the largest contributor to the increase was spending for housing and utilities, the report said.
"The reacceleration in consumption indicates the economy started the year on a stronger foundation," Lydia Boussour of Oxford Economics said in an analysis.
"But inflation continues to erode households' purchasing," and continued increases as well as concerns triggered by the "Russia-Ukraine conflict could temper consumers' willingness and ability to spend," she said.
R.Cornelis--JdB
