WASHINGTON, March 1, (Agencies): US consumers increased spending modestly in January but cut back on major purchases that signal confidence in the economy. The decline in spending on goods suggests higher tax rates that kicked in on Jan 1 may have made consumers more cautious. The Commerce Department said Friday that consumer spending rose 0.2 percent in January compared with December. The gain was driven by an increase in spending on services, partly reflecting higher heating bills. Spending on durable goods, such as cars and appliances, fell 0.8 percent. Spending on non-durable goods, such as clothing, was essentially flat.

Income plunged 3.6 percent in January, the biggest drop since January 1993. But it followed a 2.6 percent rise in December, which reflected a rush by companies to pay dividends and bonuses before income taxes increased on top earners. After-tax income fell 4 percent in January and after having risen 2.7 percent in December. Part of the January drop reflected higher Social Security taxes. Americans adjusted to higher taxes by saving less. The savings rate declined to 2.4 percent of after-tax income in January, down from 6.4 percent in December and the lowest in five years.

A better job market may help offset some of the pain from the tax increase later this year. Employers have added an average of 200,000 jobs a month from November through January. That was up from about 150,000 in the previous three months. And a drop in weekly applications for unemployment benefits suggests employers may have stepped up hiring further in February. Spending on US construction projects fell in January by the largest amount in 18 months as home construction stalled and spending on government projects fell to the lowest level in more than six years.

The dip was viewed as a temporary setback with construction expected to keep moving higher this year.
Construction spending fell 2.1 percent in January compared with December, when spending had risen 1.1 percent. It was the biggest one-month decline since July 2011, the Commerce Department said Friday.
Residential construction, which has been leading the rebound in building, stalled in January with no gain in activity following a 1.7 percent rise in December.

Non-residential building dropped 5.1 percent while public construction was down 1 percent, pushing activity in the government sector to the lowest point since November 2006.For all of last year, construction spending totaled $855.4 billion, an increase of 9.9 percent from 2011. It was the first annual gain after five straight years of decline. But construction still well below healthy levels. US manufacturing expanded in February at the fastest pace since June 2011, buoyed by increases in new orders and production. The third straight month of growth suggests factories may help the economy this year after slumping through most of 2012.

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OTTAWA: Canada’s economy grew 1.8 percent last year, a bit less than the central bank’s forecast and down from 2.6 percent in 2011, the government statistics agency said Friday. Gross domestic product in the fourth quarter was up 0.2 percent, similar to the previous quarter’s gains, as mining and oil and gas extraction was up and manufacturing recorded a significant decrease. The arts and entertainment sector, transportation and warehousing as well as wholesale trade also declined while construction, the public sector, utilities and the finance and insurance sector increased in the last three months of 2012. Household spending was up. Business investment on machinery and equipment continued to be weak, with fewer purchases of heavy trucks and buses, and more aircraft and computer outlays. Following 12 months of anemic government spending, it ticked up slightly in the fourth quarter of 2012.