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Report: Consumer Spending Rises, Income Flat

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March 30, 2012 by   Leave a Comment

U.S. consumers boosted their spending in February by the most in seven months. But Americans’ income barely grew, and the saving rate fell to its lowest point in more than two years.

The Associated Press reported that the Commerce Department said Friday (March 30)that consumer spending rose 0.8% last month. Income grew 0.2%, matching January’s weak increase. And when taking inflation into account, income after taxes fell for a second straight month.

Still, consumers are spending more after the best three-month hiring stretch in two years. Paul Dales, an economist at Capital Economics, suggested that estimated annual growth for the economy in the current January-March quarter may be revised up — to around 2.5%, compared with earlier estimates of about 2 percent.

Dales cautioned, though, that at some point, consumers won’t be able to draw further on their savings. Further job gains are needed to boost consumers’ income.

Some of the higher spending last month reflected surging gas prices. But consumers spent more on other goods and services, too. After excluding inflation, which was due mainly to gas prices, spending rose a solid 0.5%.

Consumer spending drives 70% of economic activity.

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