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Economic Report: U.S. consumer spending rebounds as omicron wanes and economy perks up

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The numbers: Consumer spending rebounded in January and increased a sharp 2.1% as omicron faded and Americans bought more new cars and recreational goods, reflecting a small upturn in the U.S. economy early in the new year.

Economists polled by The Wall Street Journal had forecast 1.6% gain. Spending had fallen in December for the first time in 10 months.

The increase in spending was still robust even if inflation is taken into account: 1.5%.

Incomes were flat in January.

Big picture: The economy has gotten off to an uneven start this year after ending 2021 on a downswing.

Households are spending plenty of money and businesses are awash in demand for goods and services. Yet high inflation and persistent shortages of labor and supplies are holding the economy back.

New headwinds are also emerging. The Federal Reserve is preparing to raise interest rates for the first time in four years while the Russian invasion of Ukraine threatens to exacerbate inflation due to higher oil prices.

Market reaction: The Dow Jones Industrial Average
DJIA,
+0.28%

and S&P 500
SPX,
+1.50%

were set to slightly higher in Friday trades. Stocks have tumbled this week because of the crisis in Ukraine.

MarketWatch Premium: The stock market may not be as overvalued as most people think, according to new research

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