- U.S. Personal Spending Cools
U.S. consumer spending rose less than forecast in February even as wage growth improved, according to government data that also showed inflation reached the Federal Reserve’s goal for the first time in almost five years.
The 0.1 percent advance in consumption followed a 0.2 percent gain the prior month, the Commerce Department said Friday. A price gauge based on consumers’ spending habits, the Fed’s preferred inflation measure, climbed 2.1 percent from a year earlier, the most since March 2012.
The figures are consistent with projections of softer consumer spending in the first quarter, partly due to smaller outlays for household utilities amid milder weather. The slowdown may prove temporary because of steady hiring, cheap financing and a surge in household optimism.
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.
Incomes rose 0.4 percent after a 0.5 percent gain that was more than initially estimated. The February increase reflected a 0.5 percent pickup in wages, the most in five months.
Disposable income, or the money left over after taxes, increased 0.2 percent after adjusting for inflation. It fell 0.1 percent in the prior month.
The median forecast in a Bloomberg survey called for a 0.2 percent gain in nominal consumer spending, with forecasts ranging from no change to a 0.4 percent gain.
Adjusting consumer spending for inflation, which generates the figures used to calculate gross domestic product, purchases fell 0.1 percent after a 0.2 percent decrease the previous month.
The data follow Thursday’s fourth-quarter GDP report that showed consumer spending climbed at a 3.5 percent annualized rate.
Consumption is projected to slow in the first quarter, moving closer to the 2.5 percent average of the past five years. That would reflect a slowdown in utility use amid unseasonably mild weather, including the second-warmest February on record according to the National Oceanic and Atmospheric Administration.
In February, household outlays on services fell 0.1 percent for a second month after adjusting for inflation. The category includes tourism, legal help, health care, and personal care items such as haircuts, and is typically difficult for the government to estimate accurately.
Purchases of durable goods, which include automobiles, also fell 0.1 percent after adjusting for inflation. That followed a 1.1 percent plunge in January. Spending on non-durable goods, which include gasoline, rose 0.1 percent.
The core price measure, which excludes food and fuel, rose 0.2 percent from the prior month and was up 1.8 percent from February 2016.
The saving rate increased to 5.6 percent from 5.4 percent the prior month.