U.S. consumers retreated in February after splurging in January as income growth stalled, the Commerce Department reported Friday.
Real consumer spending, representing outlays adjusted for inflation, fell 0.2% last month, a reversal after rising by a three-year high of 0.7% in January, the government estimated.
February's level of spending was higher than the average seen during the fourth quarter of 2008, signaling that consumer spending could add to economic growth in the first quarter, rather than subtracting as it has done in the past two quarters.
Meanwhile, personal incomes fell 0.2% in February as wages declined 0.4%, putting incomes at the lowest level since April. After-tax disposable incomes eased 0.1%. Read the full government report.
Adjusted for inflation, after-tax incomes dropped 0.4% in February, reversing direction following a 1.4% surge in January. Income figures for the first month of the year had received a boost as a result of several one-time factors, including annual cost-of-living raises and a once-a-year technical adjustment to tax payments.
In current dollar terms, last month's nominal spending rose 0.2% after a 1% gain in January.
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.
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Consumer prices increased 0.3% in February for the second month in a row. Core prices, which exclude food and energy inputs to provide a better look at underlying inflationary pressures, also rose, up 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 for February.
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%.
Meanwhile, February's income from assets fell 1.3%, marking the fifth straight decline. Business income slipped 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%, the Commerce Department's data showed.
