US consumers increased spending in January despite a sharp drop in income linked to 2013 tax changes, government data released Friday showed.
Personal spending, which accounts for about 70 percent of US economic activity, rose 0.2 percent in January, double the increase in December, the Commerce Department reported.
Personal income dropped 3.6 percent after rising 2.6 percent in December.
The income volatility came after companies advanced employee bonuses and other forms of "irregular" pay that would have been paid in 2013 to December to avoid the January 1 expiration of payroll tax breaks.
Disposable personal income, the money available for spending excluding personal taxes, dived 4.0 percent in January, after increasing 2.7 percent in December.
Excluding special factors, so-called core DPI rose 0.3 percent for the second straight month in January.
Inflation remained flat, with the personal consumption expenditures price index rising less than 0.1 percent in January after a 0.1 percent gain in December.
Excluding more volatile food and energy prices, the PCE price index rose 0.1 percent in January.
On a year-ago basis, consumer prices were up 1.2 percent and core PCE was up 1.3 percent.
The full-year 2012 data showed a weakening in spending and income from the prior year. Consumer spending increased 3.7 percent on an annual basis, compared with an increase of 5.0 percent in 2011.
Personal income rose 3.5 percent in 2012 compared with a 5.1 percent rise in the prior year.