WASHINGTON (AP) -- The Commerce Department reports how much consumers spent and earned in January. The report will be released at 8:30 a.m. EST Monday.
SPENDING SLOWS: The forecast is that consumer spending slowed to a tiny increase of 0.1 percent in January, according to a survey of economists by FactSet. The expectation is that income increased 0.4 percent. In December, Americans increased their spending 0.4 percent even though their income was flat.
WINTER IMPACT: Economists believe that harsh winter weather had will exact a toll on consumer spending through the January-March quarter.
Consumer spending is closely watched because it drives 70 percent of economic activity. The January report will be the first indication of how spending is doing in the first quarter.
Economists expect the severe winter weather is probably slowing spending this quarter after dampening spending growth in the October-December period.
The government reported Friday that the overall economy grew at a 2.4 percent annual rate in the fourth quarter, down sharply from an initial estimate of 3.2 percent growth during the quarter.
The bulk of that revision reflected a lower estimate for consumer spending, which grew at an annual rate of 2.6 percent during the quarter, instead of the 3.3 percent original estimate.
Part of the downward revision in spending reflected lower sales of autos and lower spending for non-durable goods than first thought. Analysts said the severe weather that hit much of the country was to blame for those reductions and they believe adverse weather will also hold growth back in the first quarter this year.
Some economists believe overall growth in this quarter might dip to around 2 percent. But they are still looking for a rebound beginning in the April-June quarter and for the rest of the year.
They expect that contained employment gains and a lessening of last year's drag of higher taxes and federal spending cuts will lift growth this year.
Many are forecasting that the overall economy might grow at a solid 3 percent rate this year, up from 1.9 percent growth in the gross domestic product last year. That would be the best performance since the recession ended nearly five years ago.
But before growth rebounds, the economy has to get through a soft patch caused by winter weather and a move by businesses to work down a large buildup in their stockpiles.
Once warmer weather arrives, many analysts are looking for a burst of spending caused by pent-up demand as consumers put off spending especially for big-ticket items like autos during the harsh winter.
Federal Reserve Chair Janet Yellen testified before Congress last week that the Fed still expects the economy to strengthen this year. But she told the Senate Banking Committee that the Fed will be studying the data to make sure the slowdown is just a temporary weather phenomenon.
The Fed is gradually reducing its monthly bond purchases, which have been intended to keep long-term loan rates low to encourage spending and growth.
Many economists think that as long as the economy keeps improving, the Fed will keep cutting its bond purchases this year before ending them in December.
- Budget, Tax & Economy
- consumer spending