Americans saw their incomes rise more than expected and spending sink less than forecast in December, thanks to continued support from the government, the Commerce Department said Friday.
Even as data indicates well over one million people are laid off in the world’s largest economy each week, personal income increased by 0.6 percent or $116.6 billion in December, while expenditures decreased only $27.9 billion or 0.2 percent, both better than expected.
The income gain came after a 1.3 percent decline seen in November, and the Commerce Department attributed the increase to both financial dividends and government stimulus packages.
Income was in particular supported by a $900 billion measure Congress approved last month that refreshed small business aid and expanded unemployment benefits first provided under a separate bill passed as the Covid-19 pandemic began in March.
Spending nonetheless declined, with the data showing consumers especially avoiding trips to restaurants and other food industry businesses, a sector already hit hard by Covid-19, as well as purchases of recreational equipment.
As the coronavirus pandemic wears on in the United States even as vaccines are being rolled out, Rubeela Farooqi of High Frequency Economics warned consumers may increasingly opt to hold on to their money in the coming months.
“Not only will consumption start from a weak base but containment measures that are restricting activity will likely weigh on spending,” and the first quarter of 2021 could see more weakness, she said.
As consumers spent less but received more, the data showed the personal savings rate climbing 13.7 percent to $2.38 trillion, its highest level since September.