Consumer Spending Up in January, Unlikely to Last

Washington, D.C. Consumer spending rose in January after falling for a record six straight months, pushed higher by purchases of food and other nondurable items. However, the increase is expected to be fleeting given all the problems facing the economy.

The Commerce Department said Monday that consumer spending rose 0.6% in January, better than the 0.4% gain that economists expected.

Personal incomes rose 0.4% in January, partly reflecting the cost-of-living adjustments provided to millions of Social Security recipients. Still, that was better than the 0.2% decline economists expected.

The personal savings rate surged to 5%, the highest level since 1995 as consumers continued to store away more of their incomes amid the deepening recession.

The 0.6% rise in spending followed a record six straight declines, including a 1% drop in December when retailers endured their worst holiday shopping season in at least four decades.

The January increase was driven by a sharp 1.3% rise in purchases of nondurable goods led by much higher spending on food. Durable goods posted a tiny 0.1% increase, as Americans again avoided spending on cars and other large items.

While the 0.6% increase in consumer spending was the largest since May, analysts do not expect the strength to continue amid a recession that's already the longest in a quarter-century.