WASHINGTON - Consumer purchases climbed in January by the most in eight months, fueled by faster earnings growth and indicating the biggest part of the U.S. economy gained momentum at the start of 2016.

The 0.5 percent advance followed a 0.1 percent gain the prior month, a Commerce Department report showed Friday. The January figure exceeded the 0.3 percent median forecast in a Bloomberg survey. Incomes also climbed 0.5 percent, more than projected. The Federal Reserve’s preferred measure of inflation rose by the most since October 2014.

Steady hiring, cheap gasoline, and rising home values are powering Americans’ ability to boost spending, which accounts for almost 70 percent of the economy. Households are broadening out purchases beyond big-ticket items such as cars and houses, which bodes well at a time when manufacturing is weak.

“It’s a very positive story for consumers,” Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Fla., said before the report. “They’ve got job growth, wage growth and low fuel prices. Spending will be strong enough to carry the economy through this year and avoid a recession.”

A separate report from the Commerce Department, also issued Friday, showed gross domestic product expanded at a revised 1 percent annualized rate in the fourth quarter, faster than the previously reported 0.7 percent advance and reflecting a higher value of business inventories.

David Fuller's view

One month’s economic data can be misleading and it is also subject to revision.  Nevertheless, this is encouraging data following the worst January on Wall Street for a very long time.  It provides initial evidence that the US stock market is experiencing no more than a cyclical bear market within an overall secular upward trend.

Nevertheless, overhead supply on many US stock market indices, including the DJIA, SPX, CCMP, RTY and TRAN will limit upside scope for at least the medium term.  Moreover, breaks of this year’s lows would indicate renewed vulnerability.  The weakness of most economies and the strength of the Dollar Index remain headwinds.

(See also: Global Slowdown Concerns Policy Makers as Fed, ECB Ponder Rates)