Consumer spending boost at 7-month high; income and savings slip
What high gas prices? American consumer spending last month increased by the most in seven months, even though the rise in their incomes was less impressive.
Spending was up 0.8% in February after increasing 0.4% in January, according to the Commerce Department.
Even when adjusted for inflation, much of it gas price-related, spending was still up 0.5% -- the best showing in five months. Analysts had worried that the rising cost of fuel would force consumers to cut back elsewhere.
Instead, shoppers went gaga buying cars, appliances and other items meant to last at least three years – spending on those so-called durable goods spiked 1.6% after a 1.4% boost the month earlier.
Any number of factors could have caused the spending-happy mood, according to analysts, including promising economic data (such as the lowest unemployment rate in years) as well as unseasonably warm weather. Overall, consumer confidence remains at nearly year-high levels.
But while consumers were shelling out more money in February, they weren’t bringing quite as much home. Personal income increased $28.2 billion, or 0.2% after rising the same percentage in January. The boost was lower than what analysts had expected.
Adjusting for inflation, however, pushed down the measure for the second month in a row in the first consecutive declines since spring 2010. Across 2011, however, income soared 5.1% after rising 3.7% in 2010.
Americans are also saving less, with the personal savings rate down to 3.7%, a 2.5-year low. That comes out to a $438.7 billion annual rate from $509.5 billion in January. The measure had hit a four-month high in December.
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