Primarily reflecting the $600 stimulus checks included in the last coronavirus relief bill, the Commerce Department released a report on Friday showing U.S. personal income skyrocketed in the month of January.
The Commerce Department said personal income spiked by 10.0 percent in January after rising by 0.6 percent in December. Economists had expected personal income to soar by 9.5 percent.
Disposable personal income, or personal income less personal current taxes, also jumped by 11.4 percent in January following a 0.6 percent increase in December.
The stimulus checks included in the coronavirus relief bill passed in December accounted for approximately $1.682 trillion of the $1.955 trillion increase in personal income in January.
“The upshot is that, since the checks were a one-off (at least until the $1,400 checks from the next stimulus arrive!) the bulk of this gain in income will be reversed in February,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.
The report also showed a significant rebound in personal spending, which surged up by 2.4 percent in January after falling by a revised 0.4 percent in December.
Economists had expected personal spending to jump by 2.5 percent compared to the 0.2 percent dip originally reported for the previous month.
Excluding price changes, personal spending increased by 2.0 percent in January following the 0.8 percent drop seen in December.
With income soaring by much more than spending, personal saving as a percentage of disposable income shot up to 20.5 percent in January from 13.4 percent in December.
“Looking ahead, we foresee the cocktail of generous fiscal stimulus from the American Rescue Plan and improving health conditions will fuel a burst in consumer spending,” said Gregory Daco, Chief U.S. Economist at Oxford Economics.
Meanwhile, the report said a reading on inflation said to be preferred by the Federal Reserve showed the annual rate of core consumer price growth ticked up to 1.5 percent in January from 1.4 percent in December.