Early signs point to an uptick in consumer spending at the start of the year, particularly by lower- and middle-income households receiving payments through the most recent Covid-19 relief package.

Spending by consumers who make less than $60,000 a year jumped by more than 20% in the week ended Jan. 10—the week after the U.S. Treasury Department began electronically sending stimulus payments of $600 per adult and $600 per child for individuals with adjusted gross incomes under $75,000—according to the research group Opportunity Insights’ tracker of figures from Affinity Solutions, which collects consumer credit- and debit-card spending data.

Spending by households making above $100,000 by contrast, was broadly flat compared with January 2020 that week.

Among households receiving stimulus payments, 88% spent their $600 check “like it burned a hole through their pocket,” said Jonathan Silver, chief executive of Affinity Solutions. That jump in spending shows there is “significant pent-up demand for necessities” while higher-income groups “pulled back the reins” on spending, he said.

Other data suggest an improving outlook for consumer spending. Weekly claims for unemployment benefits fell the week ended Feb. 6 to a level well below an early January peak, a sign layoffs are easing. Employers resumed hiring in January, when the unemployment rate declined to 6.3% from 6.7%. Newly reported cases of Covid-19 are down sharply from peak levels reached last month, according to Johns Hopkins data.

This post first appeared on wsj.com

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