Consumer spending rises 0.7 percent in Feb

By @ibtimes on

U.S. consumer spending rose slightly more than expected in February for the eighth straight month of gains as households tapped their savings, government data showed on Monday, while inflation accelerated at its fastest pace since June 2009.

The Commerce Department said spending rose 0.7 percent after an upwardly revised 0.3 percent gain in January.

Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to advance 0.6 percent in February after a previously reported 0.2 percent rise.

Spending adjusted for inflation increased 0.3 percent last month after being flat the prior month. After increasing at its fastest clip in four years in the final three months of 2010, consumer spending is expected to slow in the first quarter, with rising energy and food prices stealing from spending on other goods and services.

Spending grew at a 4.0 percent annual rate in the fourth quarter, helping to lift overall economic growth to a 3.1 percent pace during the quarter from 2.6 percent in the July-September period.

High food and energy prices pushed up overall inflation last month. The Commerce Department said the personal consumption expenditures price (PCE) index rose 0.4 percent, the fastest since June 2009, after gaining 0.3 percent in January

The Federal Reserve's preferred measure of consumer inflation -- the core PCE index excluding food and energy -- increased 0.2 percent after rising by the same margin in January. In the 12 months through January, the core PCE index rose 0.9 percent, the fastest rise in four months, after rising 0.8 percent in January.

The Federal Reserve so far views the high food and energy prices as transitory, but Chairman Ben Bernanke said he would act to ensure an inflationary psychology does not take root.

Incomes rose 0.3 percent last month after rising 1.2 percent in January. That compared with economists' expectations for a 0.4 percent gain.

With consumption outpacing the growth in incomes, savings fell to $676.7 billion from $710.5 billion in January. (Reporting by Lucia Mutikani, Editing by Andrea Ricci)

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