Surprisingly, consumer spending increased in January. Not by much, mind you: it came to about a 0.2% rise when adjusted for inflation. But that’s still better than nothing.
Do not be fooled by the rise in incomes and consumption this month…..It would be a huge mistake to assume that the January rise in consumer spending represents anything more than statistical noise….Rising unemployment and continued economic weakness makes it unlikely that spending will improve much if any in the months immediately ahead….Consumption will remain in the doldrums for some time yet….The trend in real consumption, however, remains downwards, and the further decline in consumers’ sentiment signals continued declines….The January monthly changes in income and spending paint a completely misleading picture of economic activity at the start of the first quarter.
On the bright side, there was this from Wachovia’s analyst: “While this up-tick does not likely signal the start of a string of increases, we will take any good news on the economy these days.” Me too. But it turns out that January’s increase was mostly related to automatic cost-of-living adjustments in things like Social Security checks, so it’s nothing to get very excited about.