The big story today is that consumer spending went up in January, even though incomes dropped by more than they had in twenty years. But that’s not the real story. For that, we have to drill down a little deeper:
Though spending rose in January, it was supported by a rise in services, probably related to utilities consumption after a cold snap during the month.
Spending on goods fell, suggesting some hit from the expiration at the end of 2012 of a 2 percent payroll tax cut. Tax rates for wealthy Americans also increased.
Americans are trying to tighten their belts, especially since most everyone took a 2% paycut at the first of the year. But “necessarily” rising energy prices combined with an “unexpected” cold snap is forcing us to dig into our savings or put consumables on the Visa card.
This is brought to you by the same folks who love to crow about “sustainability.”