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March 2, 2005

U.S. personal incomes drop in January

WASHINGTON

U.S. personal incomes, which had been bolstered by a large stock dividend payment in December, plunged 2.3 per cent in January — the sharpest decline in more than a decade.

Consumer spending was flat, the government reported Monday.

The Commerce Department said the sharp January drop in incomes followed a record 3.7 per cent jump in incomes in December with both months heavily influenced by a $3 per share dividend payment that computer software giant Microsoft made on Dec. 2.

Without that $32-billion payment, personal incomes would have shown steadier gains of 0.6 per cent in December and 0.5 per cent in January.

Personal spending was unchanged in January after having risen by 0.8 per cent in December. This reflected the fact that demand for autos sagged last month as dealers removed attractive incentive offers they had used to spur end-of-the-year sales.

Consumer spending, which accounts for two-thirds of total economic activity, is expected to post solid gains again this year, bolstered by continued improvements in employment, but not quite up to the pace in 2004.

The Associated Press

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