Consumer spending increases in February while inflation stays low

WASHINGTON -- Consumer spending increased last month the most since November as Americans appeared to start shaking off the effects of severe winter weather.

Spending rose 0.3% in February, up from 0.2% the previous month, the Commerce Department said Friday. The report was in line with economists expectations.

After a robust 0.6% increase in November, spending tailed off to just a 0.1% increase in December as bitter cold and snow swept in to much of the country.


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Consumers had more money to spend last month. Personal income was up 0.3%, matching January’s gain. It was the second straight monthly increase.

Analysts had expected just a 0.2% rise last month.

Despite higher spending, inflation remained in check. Prices were up just 0.9% last month compared with a year earlier, the Commerce Department said.

The figure is well below the Federal Reserve’s annual target of 2% and could raise deflation fears as the central bank continues to scale back a key stimulus program.

Year-over-year inflation was 1.2% in January and hasn’t been running below 1% since October.

The economy has show signs recently of heating up as the weather improves.

Friday’s report was good because it showed spending rose across the board last month, said Chris Christopher, director of consumer economics at IHS Global Insight.

“Looking ahead, we expect consumer spending to be significantly stronger in the second quarter as the impact of winter economics starts fading away,” he said.

There have been mixed views on how Americans are feeling about the economy, with a private report released Friday showing a drop in consumer confidence this month.

The closely watched consumer sentiment index from the University of Michigan and Thomson Reuters fell to 80 in March from 81.6 the previous month.

Still, views about the state of the economy and expectations for the coming months have been largely unchanged during the harsh winter, indicating an improvement is on the way, said Richard Curtin, chief economist for the survey.

“Consumers have finally begun to expect sustained gains in their personal finances, especially among younger households,” he said. “Consumers are ready to celebrate a delayed spring with renewed spending.

On Tuesday, the Conference Board reported its consumer confidence index jumped this month to its highest level in six years.