Consumer finances squeezed in January

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WASHINGTON, March 1 (UPI) -- Consumer spending rose marginally in January, despite a sharp drop in incomes, the Commerce Department said Friday.

Personal incomes dropped 3.6 percent in the month, with incomes down by $505.5 billion. Discretionary funds, concurrently, dropped by 4 percent or by $491.4 billion, the department's Bureau of Economic Analysis said.

For the second consecutive month, spending rose marginally. In January, spending rose 0.2 percent. A revised estimate for December pegged the increase in the final month of 2012 at 0.2 percent.

The drop in incomes was the steepest decline in that category since 1993, a drop partly caused by an uncharacteristic upswing in December as companies rushed their distribution of bonus checks and other dividends to beat a tax increase that was signed into law in early January.

Spending on services pushed spending's increase overall, as expenditures on goods dropped in the month. Personal savings absorbed the difference, as savings in January came to $283.9 billion, compared with $797.4 billion in December.

The report included the department's estimate of income for 2012, which rose 3.5 percent over 2011, a drop from the previous annual comparison. In 2011, incomes rose 5.1 percent, the department said.