A new round of government stimulus checks has sent personal income to its highest monthly gain since April 2020, although inflation has remained mild, the Commerce Department reported on Friday.
Personal income rose 10% after rising 0.6% in December. This was even higher than the Dow Jones estimate of 9.5%.
The gain came from issuing $ 600 incentive payments that Congress approved for millions of Americans, along with increased unemployment benefits. Consumers took these checks and spent them quickly, sending retail sales up and increasing overall spending by 2.4% for that month, a touch below the estimated 2.5%.
Slightly lower-than-expected spending figures came amid a drop in the personal savings rate to 20.5%, or $ 3.93 billion. This was the highest level since May 2020.
However, all these expenditures failed to raise inflationary pressures.
The personal consumption expenditure price index, which is the Federal Reserve’s preferred inflation indicator, rose 0.3% for the month, slightly ahead of expectations of 0.2%, but only 1.5% year-on-year, according to Dow Jones estimates. This number was the same for both the main and the base rate, which excludes volatile food and energy prices.
In September, the Fed even adopted a formal policy that would allow inflation to fall by more than 2% for a period before rates rise.
However, pandemic pressures have helped create a general disinflationary environment that has led policymakers to say that they will probably be waiting for years.
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