A new round of government stimulus checks has raised personal income to the biggest monthly gain since April 2020, although inflation remained weak, the Commerce Department said on Friday.
Personal income increased 10% after an increase of 0.6% in December. This was even higher than the Dow Jones 9.5% estimate.
The gain came from issuing $ 600 stimulus payments that Congress approved for millions of Americans, along with improved unemployment benefits. Consumers took these checks and spent them quickly, causing retail sales to skyrocket and pushing general spending to 2.4% for the month, just below the 2.5% estimate.
Slightly weaker than expected spending data came amid a drop in the personal savings rate to 20.5%, or $ 3.93 trillion. That was the highest level since May 2020.
All of these expenditures have failed to provoke inflationary pressures, however.
The personal consumption expenditure price index, which is the Federal Reserve’s preferred inflation indicator, rose 0.3% in the month, slightly ahead of the 0.2% expectation, but rose only 1.5% year on year , corresponding to Dow Jones estimates. This figure was the same for both the base rate and the core rate, which excludes volatile food and energy prices.
In September, the Fed even adopted an official policy according to which it would allow inflation to exceed 2% for a period before raising rates.
However, pandemic-related pressures have contributed to a general disinflationary environment that has prompted lawmakers to say they are likely to be on hold for years.
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