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## Despite Income Growth, Americans Tightened Their Wallets in January
*Published February 28, 2025, 5:24 PM EST*
**Main Aspects:**
* A government document issued on Friday showed increased family savings along with growing incomes and reduced spending in January.
* Although the January decline may be partially fleeting, the decrease in customer spending could indicate problems for the financial system.
* Worries about President Trump’s suggested taxes may be hindering significant buys.
**Article:**
American employees saw their salaries grow in January, but they were less willing to spend due to fears about the economic perspective.
The Bureau of Economic Analysis reported on Friday that individual income grew by 0.9%, marking the biggest increase in a year. At the same time, individual spending fell by 0.2%, the most considerable decrease since February 2021. According to a survey of economists by Dow Jones and The Wall Street Journal, the income growth exceeded the predicted 0.4%. The spending decrease was equally astonishing, contrasting with the median forecast of a 0.1% increase.
If this new unwillingness to shop becomes a lasting pattern, it could spell trouble for the financial system, as customer spending is a main driver of US financial growth, accounting for over two-thirds of the Gross Domestic Product.
Sal Guatieri, a senior economist at BMO Capital Markets, commented that the plunge might be partly credited to a surge in vehicle sales in December, the impact of unusually cold weather, and the Los Angeles wildfires – all aspects that dampened spending.
Economists at Wells Fargo Securities suggested in a note that customers might also be anxious about the possible effects of President Donald Trump’s promised taxes, which could lead to increased costs.
A recent poll reveals that shoppers are becoming more worried about how import taxes impact their family finances. Growing salaries and yearly Social Security inflation adjustments point to a favorable forecast for future consumer outlays. This additional money might spur expenditure, especially among wealthy households.
“Outlays usually fluctuate with earnings,” stated Robert Frick, a business economist at Navy Federal Credit Union, in a statement. “If individuals have funds, they are inclined to disburse them.”
Nevertheless, elevated loan percentages and the enduring impacts of price hikes during the epidemic continue to depress consumer spending over time.
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