Washington: US incomes rose much more sharply than expected in January, while spending and core consumer price growth also outpaced forecasts, according to a government report on 1 March that could heighten inflation concerns at the Federal Reserve.
But a separate government report showed a bigger-than-expected increase in initial jobless benefits claims, while an industry survey showed planned US layoffs rose 33% to a five-month high in February.
Personal incomes rose 1% in January, marking their biggest gain in a year and doubling the December increase, while January consumer spending rose 0.5%, the Commerce Department said.Core consumer prices, which exclude volatile energy and food costs, rose 0.3%, outpacing forecasts for a 0.2% rise after an unrevised 0.1% gain in December.
The core prices were up 2.3% compared with a year earlier after an unrevised 2.2% 12-month gain in December. Officials at the Federal Reserve have said they prefer the 12-month rise in core prices to remain between 1% and 2%.“The core PCE price number was still above the Fed’s comfort zone on a year over year basis. This suggests that the Fed is probably going to hold interest rates steady for a while,” said Gary Thayer, chief economist at A.G. Edwards and Sons in St. Louis.
Analysts polled by Reuters had forecast core consumer prices to rise 0.2% in January, with personal income expected up just 0.3%, and personal consumption expenditures expected to rise 0.4%.
In the US Treasury bond market, prices for benchmark 10-year notes, which had risen on global equity market jitters, lost a bit of ground after the data, while the dollar was steady against the euro but extended losses against the yen. Stock index futures pointed to a lower opening for US stocks.
“The bond market, which was up in the morning on the weakness in stocks, may have softened a bit on the news. The good personal income number initially supported the stock market and dampened the safety bid in bonds,” Thayer said.
The Commerce Department said the January saving rate improved slightly to a negative 1.2% of disposable personal income after a negative 1.4% rate in December. The saving rate has been negative since April 2005.
Separately, the US Labour Department reported that initial jobless claims rose by 7,000 last week, pushing the four-week moving average of new claims to its highest level since the week of 29 October, 2005.
Initial jobless claims hit a seasonally adjusted 338,000, defying analysts’ predictions for a fall to 325,000.
The four-week moving average of new claims, a more reliable measure of employment conditions, rose for the fourth consecutive week to 335,250.
A report by employment consultants Challenger Gray & Christmas said planned layoffs rose 33% to 84,014 in February from 62,975 in January as weakness in the housing market and auto industry seemed to spread into other sectors.
Announced layoffs totaled 84,014 in February, up from 62,975 in January but 4% less than a year earlier.The February job cut figure is the highest since the 100,315 announced in September, the report said.The US automotive industry led all other sectors in terms of planned job cuts last month, with 22% of the total, Challenger said.
“On balance (the data) will still feed into market suspicions that there is some deterioration in the labour market— even allowing for dodgy seasonals for initial claims — at the same time as core inflation is proving a little sticky,” said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich Connecticut.