US personal consumption holds up better than expected at the start of 2022

Americans opened their wallets and spent freely at the start of the year despite a lack of further income growth.

According to the Department of Commerce, in seasonally adjusted terms US personal incomes were unchanged in January (consensus: -0.3%) in comparison to the month before.

However, even when adjusted for inflation, personal spending jumped by 1.5% month-on-month, even if after a nearly equally large fall in the month before.

In so-called chained dollar terms, personal consumption expenditures rose by 1.5% on the month (consensus: 1.2%), following a decline of 1.3% in December.

That was so despite a pick up in inflation with the PCE price deflator rising by 0.6% on the month and by 6.1% on the year.

The personal savings rate as a proportion of disposable income dropped from 8.2% in December to 6.4% for January.

Worth noting, economists at Barclays Research had forecast a 2.4% month-on-month surge in PCE, whereas incomes had been expected to shrink "sharply", by 1.4%, due to fading support programmes linked to the pandemic.