Consumer Spending, Personal Incomes Rise; Inflation Rises Fastest in 6 Months

Personal income increased $65.4 billion, or 0.6% in February while , consumer spending also rose by 0.6% or $55.5 billion, according to the Bureau of Economic Analysis. Private wage and salary increased $19.3 billion in February, compared with an increase of $64.9 billion in January because of bonus payments in January.

Underlying inflation pressures rose at the fastest pace in six months, however. Analysts noted that much of the strength in consumer spending last month reflected higher inflation, reports AP. After adjusting for price increases in gasoline and other products, consumer spending rose by a much more sedate 0.2% in February.

Consumer spending is watched closely because it accounts for two-thirds of total economic activity.

  • an inflation barometer that excludes energy and food shot up by 0.3 percent in February, the biggest increase since a similar rise last August.
  • core inflation increased by 2.4 percent over the past 12 months. The year-over-year increase has not been exceeded since a 2.5 percent jump in April 1995.
  • the 0.6 percent increase in incomes followed an even bigger 1 percent surge in January, an increase which reflected $50 billion at an annual rate in bonus payments to business executives.
  • even with the rise in incomes, the savings rate remained in negative territory for the 23rd consecutive month. It was unchanged in February at a negative 1.2 percent of after-tax incomes, the same as in January.

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