WASHINGTON - U.S. consumers spent slightly more in February following two straight monthly declines and their income rose by a healthy amount, a development that economists hope will keep boosting spending in coming months.
Consumer spending edged up a tiny 0.1 percent last month following declines of 0.2 percent in both January and December, the Commerce Department reported Monday. The result reflected a 0.4 percent increase in nondurable goods such as food and energy after three straight months of declines that stemmed from falling gasoline prices. Durable goods were down 0.1 percent as auto sales weakened.
Income grew a solid 0.4 percent in February, matching January's rise. Economists are hopeful that continued strong income gains will lift consumer spending, which accounts for 70 percent of economic activity.
With income growing faster than spending, the saving rate jumped to 5.8 percent of after-tax income, up from 5.5 percent in January and the highest level since December 2012.
Part of the increase in saving was probably involuntary. Severe winter weather kept shoppers away from the malls and auto showrooms.
An earlier report showed retail sales fell in February for a third straight month as Americans cut back on car buying by the most in more than a year. Sales also fell at restaurants, home improvement centers and electronics and appliance stores. Harsh winter weather in much of the country was blamed for the decline.
The weather-related weakness is expected to dampen overall economic growth during the January-March quarter, with many economists forecasting growth to slow to around 1.5 percent during the quarter. But analysts are also optimistic for a rebound in coming quarters to growth of 3 percent or better.
If the economy does hit 3 percent growth this year, it would be the fastest pace for the economy in a decade.
Strong employment gains of the past year should continue this year, and the stronger job market will likely lead to rising household incomes and more consumer spending.
Federal Reserve Chair Janet Yellen said Friday that ongoing improvement in the economy means an increase in the Fed's key interest rate could come later this year. Any rate increases, however, will likely be very gradual.
Many economists believe that with inflation still running below the Fed's target of 2 percent, the Fed will be cautious in raising rates and hold off on the first rate hike until September. The Fed's target for short-term rates has been at a record low near zero since December 2008.
The new report on consumer spending showed that an inflation gauge tied to consumer spending patterns rose 0.2 percent in February after three months of declines. Excluding food and energy, this inflation gauge was up 0.1 percent in February and has risen just 1.4 percent over the past 12 months, well below the Fed's 2 percent target.