Published: Sat, April 01, 2017
Technology | By Timothy Carter

US consumer spending up tiny 0.1 percent in February

US consumer spending up tiny 0.1 percent in February

USA consumer spending increased less than forecast in February, though income rose in line with expectations, while core inflation ticked up, official data showed on Friday.

The 0.1 percent advance in consumption followed a 0.2 percent gain the prior month, the Commerce Department said Friday. The personal consumption expenditures (PCE) price index gained 0.1 per cent last month after jumping 0.4 per cent in January. The government delayed the issuing of tax refunds this year as part of efforts to combat fraud. While unseasonably warm weather reduced households' heating bills, it restricted spending last month. Weak consumer spending resulted in the Atlanta Federal Reserve trimming its first-quarter economic growth estimate by one-tenth of a percentage point to a 0.9% annualised rate.

Central bank officials, who raised interest rates at their March meeting, are expected to lift them further this year following progress on their full employment and inflation goals. Still, that was an improvement over a 0.2 percent decline in January.

The slowdown in consumer spending reported by the US Commerce Department on Friday is, however, likely to be temporary with consumer confidence at a more than 16-year high and a tightening labour market pushing up wage growth.

Even with economic growth slowing at the start of the year, inflation is rising.

Incomes rose 0.4 percent after a 0.5 percent gain that was more than initially estimated. Economists polled by MarketWatch has forecast 0.2% gain.

Meanwhile, the core PCE price index rose 0.2% in February from a month earlier, in line with forecasts and compared to the gain of 0.3% in the first month of the year. The PCE price index rose 1.9% in January. That's the sharpest 12-month rise since March 2012 and slightly above the Fed's 2 percent inflation target. It's the first time the yearly rate of inflation topped 2% since March 2012.

While inflation is now back to levels more palatable to the Fed, the upturn has taken a bite out of real consumer spending.

In February, household outlays on services fell 0.1 percent for a second month after adjusting for inflation. In addition to the elevated readings of consumer confidence, hiring remains solid while average hourly earnings are picking up, which will support income and spending.

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