A sluggish income gain highlighted a moderate growth in US consumption this year, which along with a sliding business investment would likely drag the US economy down in the coming months.
While the US Department of Commerce also suggested inflation would improve last month as a result of higher prices for energy products, a pressure on key prices remained muted. The central bank left interest rates untouched Thursday and could keep its financial policy intact at least in the next quarter.
A Commerce department report also disclosed income growth weakened to 0.2 percent, indicating a drop in agriculture subsidies, while the Federal Reserve said core price monitoring beat analysts' projections with a 0.2 percent increase, the biggest since July 2019.
The figures add to other indications that consumers may offer the record-long expansion less of a strong nudge than before. The numbers show additional information after a Thursday paper showed gross domestic product growth in the fourth quarter matched the previous quarter but consumption was down for a second consecutive month.
Momentum in the US economic rally is estimated to ease considerably in the first three months this year, partly due to Boeing's production halt this month of its beleaguered 737 MAX commercial aircraft, which was grounded after two air disasters.
Other reports stated that American consumer sentiment was up in January this year to an eight-month peak, a University of Michigan poll revealed, while a gauge of trade activity in the Chicago region dropped to a four-year cellar, adding to signs corporate investment remains weak.
Consumers helped aid the world's biggest economy in 2019, as it was hounded by trade policy restrictions, a plunge in factory output, and failing business investments. While trade frictions with China have eased, headwinds from the investment and manufacturing sectors remain.
Despite the anticipated weakening in growth, a recession is not expected as the economy draws support from the central bank's three interest rate reductions last year. Federal Reserve Chairman Jerome Powell pointed out Wednesday that he sees "moderate growth to continue" but also acknowledged some risks, including the current outbreak in China.
The US currency weakened against a host of other key currencies, while prices of US Treasuries were up. Shares on Wall Street were down on jitters over the impact of the Wuhan epidemic on world economic growth.
Meanwhile, a separate report showed a measure of factory activity in the Midwest retreated to a four-year low this month, with major companies reporting a decline in demand and order backlogs.
