The tax cuts hammered out by the Obama administration and the new Republican-controlled Congress boosted US incomes by 1 per cent last month – the biggest rise in nearly two years. But consumers decided against splashing out and used the extra funds to bolster their savings.
Figures released by the Commerce Department last night showed that consumer spending edged up by just 0.2 per cent in January, its smallest increase in seven months, indicating that US consumers chose to bank the tax benefits. Economists had hoped that spending, which rose at an annual rate of 4.1 per cent over the final three months of 2010, would rise by 0.4 per cent.
Savings, on the other hand, rose to $677.1bn, the highest level since August, and well above the $620.9bn level seen in December.Reuse content