Americans pulled back on their spending in January, even as their incomes surged, a sign the economy was growing modestly before the threat of coronavirus arose.
The Commerce Department said Friday that consumer spending increased 0.2% last month, down from 0.4% in December and smallest gain since October. Incomes, however, rose 0.6%, the biggest gain in nearly a year, spurred by bigger paychecks and an increase in Social Security benefits stemming from a cost of living adjustment.
The additional income could help offset the likely drag from this week's stock market plunge and the broader threat from the coronavirus, which has caused many economists to slice their estimates for growth in the first three months of the year. Most analysts now forecast that the U.S. economy will expand at a roughly 1.5% annual pace in the first quarter, down from 2.1% in the fourth quarter.