spending news

Spending Outpaces Income, Savings Rate Declines

The Bureau of Economic Analysis (BEA) reported that consumer spending grew 0.8% in February, increasing expectations for a stronger first-quarter.  On the other hand, personal income grew just 0.2%.  This is just half the rate expected by economists. Of the nation's gross domestic product, consumer spending represents about 70.6 percent.

As a percentage of disposable (after tax) income, personal savings fell to 3.7 percent in February from 4.3 percent in January.

The increase in spending was evenly divided between goods and on services, but most of the increase in spending on goods came in the “non-durable” category, hinting at a lingering unwillingness by consumers to make purchase which require borrowing.

The Personal Consumption Expenditure (PCE) Price Index – often considered the Federal Reserve’s favored measure of inflation – increased 0.3 percent and is now 2.3 percent above its year ago level.  Core consumer inflation has been rising for the past 12 months.