U.S. consumers retreated in February after splurging in January as income growth stalled, the Commerce Department reported Friday.
Real consumer spending (after adjusting for inflation) fell 0.2% in February after rising by a three-year high of 0.7% in January, the government estimated.
The level of spending in February was higher than the fourth-quarter average, signaling that consumer spending could add to growth in the first quarter, rather than subtracting as it has done in the past two quarters.
Incomes fell 0.2% in February as wages declined 0.4%. Incomes were at the lowest level since April. After-tax disposable incomes fell 0.1%.
After adjusting for inflation, after-tax incomes dropped 0.4% in February after surging 1.4% in January. January's income figures were boosted by several one-time factors, including annual cost-of-living raises and a once-a-year technical adjustment to tax payments.
In current dollar terms, nominal spending rose 0.2%
With incomes falling and nominal spending increasing, the personal savings rate ticked lower to 4.2% of disposable incomes, compared with 4.4% in January.
Details
Consumer prices increased 0.3% in February for the second month in a row. Core prices, which exclude food and energy prices to get a better look at underlying inflationary pressures, rose 0.2%. In the past year, consumer prices are up 1%, while core prices are up 1.7%.
Real spending on durable goods fell 1.5%. Real spending on nondurable goods and services was unchanged.
Income from wages and salaries fell 0.3% in nominal terms. All other sources of income also declined, except transfer payments (such as Social Security and unemployment benefits), which rose 0.8%.
Income from assets fell 1.3%, the fifth straight decline. Business income fell 0.1%, the sixth decline in the past seven months.
Compared with February 2008, real disposable incomes are up 2.2%, while real spending is down 1.4%.
