US consumer spending slows; inflation pushing higher

USA consumers increased their spending last month at the weakest pace in six months, while the 12-month rise in consumer prices was the largest in almost five years.

Personal incomes rose 0.4 percent, or $57.7 billion, in February, far faster than the 0.1 percent gain in spending.

The other components of the data though were more subdued with consumer spending barely rising in February with a 0.1 percent gain.

The US Federal Reserve's policy target for inflation is for core PCE inflation at or about 2.0% on a sustained basis. The U.S. central bank raised its benchmark overnight interest rates by a quarter of a percentage point this month. That was fastest annual rate in almost five years. Gross domestic product increased at a 2.1 percent annualized rate in the fourth quarter, stepping down from the July-September quarter's brisk 3.5 percent pace. It's the first time the yearly rate of inflation topped 2% since March 2012.

The slower spending growth came as incomes continued to rise strongly.

However, economists expect the economy will accelerate later this year to rates around 2.5 percent or more if President Donald Trump is successful in winning approval for his economic stimulus package, which includes tax cuts, infrastructure spending increases and deregulation. Services, the category that covers utility payments, was up just 0.1 percent. Spending last month was held back by a 0.1 percent dip in purchases of big-ticket items like automobiles. That was the smallest gain since August and followed an unrevised 0.2 percent rise in January.

  • Zachary Reyes