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Consumer Spending Increases in February while Inflation Stays Low

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By Jim Puzzanghera

consumer_spending_woman_shopping(MCT)—Consumer spending increased last month the most since November as Americans appeared to start shaking off the effects of severe winter weather.

Spending rose 0.3 percent in February, up from 0.2 percent the previous month, the Commerce Department says Friday. The report was in line with economists’ expectations.

After a robust 0.6 percent increase in November, spending tailed off to just a 0.1 percent increase in December as bitter cold and snow swept into much of the country.

Consumers had more money to spend last month. Personal income was up 0.3 percent, matching January’s gain. It was the second straight monthly increase.

Analysts had expected just a 0.2 percent rise last month.

Despite higher spending, inflation remained in check. Prices were up just 0.9 percent last month compared with a year earlier, the Commerce Department says.

The figure is well below the Federal Reserve’s annual target of 2 percent and could raise deflation fears as the central bank continues to scale back a key stimulus program.

Year-over-year inflation was 1.2 percent in January and hasn’t been running below 1 percent since October.

The economy has shown signs recently of heating up as the weather improves.

Friday’s report was good because it showed spending rose across the board last month, says Chris Christopher, director of consumer economics at IHS Global Insight.

“Looking ahead, we expect consumer spending to be significantly stronger in the second quarter as the impact of winter economics starts fading away,” he says.

There have been mixed views on how Americans are feeling about the economy, with a private report released Friday showing a drop in consumer confidence this month.

The closely watched consumer sentiment index from the University of Michigan and Thomson Reuters fell to 80 in March from 81.6 the previous month.

Still, views about the state of the economy and expectations for the coming months have been largely unchanged during the harsh winter, indicating an improvement is on the way, says Richard Curtin, chief economist for the survey.

“Consumers have finally begun to expect sustained gains in their personal finances, especially among younger households,” he says. “Consumers are ready to celebrate a delayed spring with renewed spending.

Last Tuesday, the Conference Board reported its consumer confidence index jumped this month to its highest level in six years.

©2014 Los Angeles Times
Distributed by MCT Information Services

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