US consumers pull back on January spending
Published 01/03/2011 | 05:00
US CONSUMER spending cooled more than forecast in January as rising food and fuel prices caused Americans to cut back on post-holiday visits to malls and restaurants.
Purchases rose 0.2pc, the smallest gain since June, as winter storms may have also discouraged shoppers, according to figures from the Commerce Department yesterday in Washington. A report from Chicago-area purchasing managers showed businesses expanded in February at the fastest pace in two decades.
Economists at Morgan Stanley and Deutsche Bank Securities cut forecasts as the data showed households may have used some of the extra cash from the payroll tax cuts to boost savings. At the same time, the world's largest economy is getting a lift from manufacturers like Deere as business investment in new equipment accelerates and exports climb.
"The consumer has become slightly more cautious," said John Silvia, chief economist at Wells Fargo Securities in Charlotte, North Carolina, who correctly projected the gain in purchases. "The extra money for gas prices is coming out of consumers' pocket. Spending will be positive, but modest."
Stocks advanced, extending a third consecutive monthly gain, after billionaire investor Warren Buffett said he's looking to make more acquisitions. The S&P 500 Index rose 0.6pc to 1,327.