U.S. household income jumped 10% in January as the government delivered stimulus payments to households and consumer spending rose briskly, priming the economy for a burst in growth this year.
The increase in income was the second largest on record, eclipsed only by last April’s gain when the federal government sent an initial round of pandemic-relief payments, the Commerce Department said Friday. Household income has risen 13% since February 2020, the month before the pandemic shut down large segments of the economy.
Spending rose 2.4% in January, the first gain in three months and the biggest jump since last summer. Households spent broadly on goods, particularly long-lasting big-ticket items. Spending on services also increased for the first time since last October.
Americans are now sitting on a historically large pile of cash. Their savings totaled $3.9 trillion last month, up from $1.4 trillion last February.
“The levels are off the charts,” Joseph Brusuelas, chief economist at RSM US LLP, said of the cash reserves. “You’re going to see the fuel for a pretty big consumer-led boom this year, which will spill into next.” He expects the economy to grow 6.5% or higher this year.