US consumer spending rose more than expected in January and price pressures continued to mount, with annual inflation jumping to four-decade highs.
The Commerce Department said on Friday that consumer spending, which accounts for more than two-thirds of US economic activity, jumped 2.1% last month after falling 0.8% in December.
Economists polled by Reuters had forecast a 1.5% increase in spending.
Consumer spending is being supported by strong savings and wage growth amid a tightening labor market. This is offsetting the reduction in public money for families.
High inflation, which is eroding wage gains, could affect economic growth. The rise in prices, which is well above the Fed’s 2% target, may continue after Russia invaded Ukraine on Thursday.
The PCE index rose 0.6% in January, after advancing 0.5% in December.
In the 12 months through January, the PCE jumped 6.1%, the most intense increase since 1982 and after an increase of 5.8% in December on the same basis of comparison.
Excluding the volatile energy and food components, PCE rose 0.5%, repeating the December rate.
The so-called core PCE jumped 5.2% year-on-year in January, the highest since 1983, from 4.9% in the 12 months through December.
Durable goods orders rise sharply
New orders for US-made capital goods rose more-than-expected in January, while shipments rose, suggesting an acceleration in business spending on equipment in the early part of the first quarter, although inflation responded for part of that rise.
Orders for capital goods excluding defense and aircraft, a measure of corporate spending plans, rose 0.9% last month, the Commerce Department said.
The so-called core of capital goods increased 0.4% in December. Economists polled by Reuters had predicted a 0.5% rise in orders in January.
Shipments of capital goods accelerated 1.9% last month, after rising 1.6% in December.
Shipments of capital goods are used to calculate expenditure on equipment in GDP (Gross Domestic Product).
Orders for durable goods, items ranging from toasters to aircraft, rose 1.6% last month after rising 1.2% in December.
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