As a result, consumer spending increased by 2.4% last month. The jump is great news for America’s economy, two-thirds of which relies on consumer spending. That said, spending rose ever so slightly less than economists predicted and is still below pre-pandemic levels.
“The 10% surge in personal income was used wisely with some funds ending up in the piggy bank, some used to pay off debt, and a decent chunk used to restock, refuel, redesign, and revive old spending habits,” said Gregory Daco, chief US economist at Oxford Economics.
The January data show that “while many activities remain constrained, substantial fiscal support will disproportionately impact savings as opposed to consumption,” Citi economist Veronica Clark said in a note to clients.
Americans have also been saving more during the pandemic, as much of public life remains shut down. The personal savings rate stood at 20.5% in January. As the economy reopens, these savings should facilitate even more spending and help the recovery along.