US ECONOMY STARTS 2016 SLOW YET STEADY AS CONSUMER SPENDING GOES UP IN JANUARY

Consumer spending grew in January, showing an improvement in retail sales and home purchases. On Friday, the Commerce Department reported personal spending rose 0.5% in January from the prior month. Americans’ pretax earnings from salaries and investments increased at about the same pace. US consumer confidence dropped slightly in January but recovered slightly in February, a sign of slower but steady economic growth.

Reports Friday also revealed that gross domestic product advanced at 1%, higher than the estimate of 0.7%. Inflation still runs below the Federal Reserve’s 2% inflation target.

Improvement in overall economic growth for the quarter ending January 30 was mainly due to the fact that companies pulled back on inventory less than originally expected. Economists have cautioned that first quarter growth may be slow as companies take longer to work through their well-replenished stock.

Source: The Wall St. Journal

US Labor Costs Rise at Slowest Pace in 30 Years

US labor costs rose a seasonally adjusted 0.2% in the spring, the slowest pace in three decades. It is the slowest quarterly gain since record keeping began in 1982. Economists were expecting a 0.6% increase. The slow wage growth could affect the Fed’s decision to raise short-term interest rates. Fed officials anticipated an acceleration in wages to signal the labor market is healthy after the recession and could withstand an increase in borrowing costs.

The figures suggest that slack remains in the labor market despite signs that workers’ wages were picking up and a sharp drop in unemployment.

“At this stage of the business cycle, with significant improvement in the labor market, wage growth should be accelerating,” PNC economists Stuart Hoffman and Gus Faucher said in a note to clients. “Weak wage growth is also somewhat puzzling given recent announcements from big companies, such as Wal-Mart and Target, that they are raising workers’ pay.”

Source: The Wall Street Journal