Consumer spending up for eighth consecutive month
WASHINGTON (Reuters) - U.S. consumer spending rose for an eighth straight month in February as households tapped savings to cover higher food and energy prices.
Spending rose 0.7 percent in February after a 0.3 percent increase in January, and inflation accelerated at its fastest pace since June 2009, the Commerce Department said on Monday.
Adjusted for inflation, spending was up a far smaller 0.3 percent last month after being flat the prior month.
“The data provide yet more evidence that higher prices are denting economic growth,” saidPaul Dales, a senior U.S. economist at Capital Economicsin Toronto.
Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, to advance 0.6 percent.
U.S. government debt prices extended losses after the data, while stock index futures were little changed.
After increasing at its fastest clip in four years in the final three months of 2010, consumer spending is expected to slow in the first quarter, with rising energy and food prices stealing from spending on other goods and services.
Spending grew at a 4.0 percent annual rate in the fourth quarter, helping to lift overall economic growth to a 3.1 percent pace during the quarter from 2.6 percent in the July-September period.
High food and energy prices pushed up overall inflation last month. The Commerce Department said the personal consumption expenditures price (PCE) index rose 0.4 percent, the fastest since June 2009, after gaining 0.3 percent in January
A core measure of inflation closely watched by the Federal Reserve, the core PCE index excluding food and energy, increased 0.2 percent after rising by the same margin in January.
In the 12 months through January, the core PCE index rose 0.9 percent, the fastest rise in four months, after rising 0.8 percent in January.
Fed Chairman Ben Bernanke has said high food and energy costs should prove transitory, but that the central bank was prepared to act if needed to ensure an inflation psychology does not take root.
Incomes rose 0.3 percent last month after rising 1.2 percent in January. That compared with economists’ expectations for a 0.4 percent gain.
With consumption outpacing the growth in incomes, savings fell to $676.7 billion from $710.5 billion in January.
(Reporting by Lucia Mutikani, Editing by Andrea Ricci)