Consumer Spending Stays High Despite Slim Pay Rise

Consumer spending continued to grow at a rapid clip in February despite a meager rise in Americans’ personal income, the government said today.

The Commerce Department said personal consumption spending, which includes virtually everything except interest payments on debt, rose 0.7% in February, off only slightly from the 0.8% increases in both January and December.

The 0.3% increase in personal income last month was only half the 0.6% January gain and was also down from a 0.5% increase gain in December.

However, both the income and spending gains were expected to support moderate growth in the overall economy of around 4% for the first three months of the year.

February’s gain in personal income was the lowest since an identical increase last May. Much of last month’s rise was attributed to a strong increase of $6.3 billion in private wages that followed an increase of $3.2 billion in January.

However, payrolls at manufacturing plants declined $1.1 billion in February after increasing $1.4 billion in January.

Government wages and salaries increased $2.3 billion last month, a smaller gain than the $4.9 billion January increase, which reflected a 3.5% raise for most federal civilian employees and a 4% raise for the military.

Farm proprietors’ income dropped $3.6 billion in February following a decline of $5 billion in January.

One of the key forces driving the economy has been consumer spending. The February gain of 0.7% included a sharp increase in purchases of clothing and other non-durable goods. Consumers increased spending for these items by $10.9 billion last month compared to an increase of $3.5 billion in January.

Personal savings, meanwhile, declined to an annual rate of $140.3 billion. That left the national savings rate--savings as a percent of disposable income--at 5.2% in February, down from 5.7% the month before.