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March 1, 2013, 8:30 a.m. EST

U.S. consumers keep spending in January

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By Jeffry Bartash

WASHINGTON (MarketWatch) - Consumer spending in the U.S. rose in January for the third straight month, suggesting that a payroll tax increase on American workers at the start of the year has not affected their buying patterns all that much. Spending climbed 0.2% last month on a seasonally adjusted basis, the Commerce Department said Friday. That was slightly higher compared to a downwardly revised 0.1% increase in December. Personal income, meanwhile, sank 3.6% to mark the sharpest drop in 20 years. Economists surveyed by MarketWatch had forecast a 0.2% rise in spending but a 2.6% drop in personal income. Incomes surged a revised 2.6% in December as companies accelerated bonuses and dividend payments ahead of a tax increase in January, but that led to the sharp decline in earnings last month. Since incomes fell so much, the personal savings rate skidded to 2.4% in January from 6.4% in December. The level of savings in January was the lowest in six years while the increase in savings in December was the largest in four years. Also, inflation as gauged by the core PCE price index edged up 0.1%. The closely followed core rate has risen just 1.3% in the past 12 months, down a tick from December.

Read the full story:
Worst income dip in 20 years doesn’t stop