US family income rose 10% in January, with the government delivering stimulus payments to families and consumer spending rising 2.4%, preparing the economy for a growth spurt this year.
The increase in revenue was the second largest on record, eclipsed only by the increase last April, when the federal government sent an initial round of pandemic aid payments, the Commerce Department said on Friday. The increase in consumer spending in January was the first since October.
Under a $ 900 billion stimulus program signed by former President Donald Trump in late December, the federal government has been sending one-time cash payments of $ 600 to most families. It has also paid unemployed workers $ 300 a week in addition to their normal unemployment benefits. Meanwhile, job growth resumed in January, after falling in December. And higher-income families, unable to travel or dine out, have accumulated a high level of savings.
“This combination will be very powerful for driving consumer spending this year,” says Lydia Boussour, senior economist at Oxford Economics. She and her colleagues project that this summer, US production will have fully recovered from last year’s pandemic decline, mainly because of an increase in consumer spending.
Oxford Economics predicts that production will grow 7% this year, which would be the biggest growth in decades. In a Wall Street Journal survey earlier this month, economists, on average, expected gross domestic product to increase by almost 4.9% this year.