A fresh round of government stimulus checks sent personal income up to its biggest monthly gain since April 2020 though inflation remained tame, the Commerce Department reported Friday.
Personal income jumped 10% after 0.6% increase in December. That was even higher than the 9.5% Dow Jones estimate.
The gain came from the issuance of $600 stimulus payments that Congress approved for millions of Americans. Consumers took those checks and spent them quickly, sending retail sales surging and pushing overall expenditures up 2.4% for the month, a touch below the estimate of 2.5%.
The slightly softer-than-expected spending data came amid a bust in the personal savings rate to 20.5%, or $3.93 trillion.
All that spending failed to gin up inflation pressures, however.
The personal consumption expenditures price index, which is the Federal Reserve’s preferred inflation gauge, rose 0.3% for the month, slightly ahead of the 0.2% expectation but was up just 1.5% year over year, matching Dow Jones estimates. That number was the same both for the headline rate and the core, which excludes volatile food and energy prices.
In September, the Fed even adopted an official policy in which it would allow inflation to run hotter 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 likely will be on hold for years.
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