U.S. consumers step up spending in February, inflation remains muted

Fri Mar 28, 2014 8:58am EDT
 
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WASHINGTON (Reuters) - U.S. consumer spending rose in February, in the latest sign that the economy was regaining strength after being chilled by bad weather.

The Commerce Department said on Friday that consumer spending increased 0.3 percent last month after rising by a revised 0.2 percent in January. Spending was previously reported to have increased 0.4 percent in January.

Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, rising 0.3 percent in February.

The dollar rose to a session high against the yen after the data. U.S. stock index futures were little changed.

Spending in February was lifted by an increase in services consumption, likely because of increased demand for health care and utilities.

When adjusted for inflation, consumer spending rose 0.2 percent in February after gaining 0.1 percent in January.

This so-called real spending measure goes into the calculation of gross domestic product. Consumer spending rose at its fastest pace in three years in the fourth quarter, helping to lift economic growth to an annualized pace of 2.6 percent during the period.

A combination of bad weather, a slow pace of inventory accumulation by businesses, the expiration of long-term unemployment benefits and cuts to food stamps is expected to hold back growth to around a 2 percent rate in the first quarter.

But a rebound is expected as these factors fade.   Continued...

 
A J.Crew store is seen in Manhattan, New York March 3, 2014. REUTERS/Mike Segar