A new round of government stimulus checks sent personal incomes up to their highest monthly gain since April 2020, although inflation remained mild, the Commerce Department reported on Friday.
Personal income rose 10% after a 0.6% increase in December. This was even higher than the Dow Jones 9.5% estimate.
The gain came from the issuance of $ 600 stimulus payments that Congress approved for millions of Americans, along with enhanced unemployment benefits. Consumers took these checks and spent them quickly, causing retail sales to rise and global spending to rise 2.4% during the month, a touch below the 2.5% estimate.
Slightly softer-than-expected spending data came amid a turnaround in the personal savings rate of up to 20.5%, or $ 3.93 trillion. This was the highest level since May 2020.
However, all this spending failed to increase inflationary pressures.
The personal consumption expenditure price index, which is the Federal Reserve’s preferred inflation indicator, rose 0.3% during the month, slightly ahead of the 0.2% expectation, but it rose just 1.5% year-over-year, coinciding with Dow Jones estimates. This number was the same for both the main rate and the core, which excludes volatile food and energy prices.
Even in September, the Fed adopted an official policy in which it would allow inflation to be higher than 2% for a period before raising rates.
However, pandemic-related pressures have contributed to a general disinflationary environment that has led policymakers to say they will likely be on hold for years.
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