US consumer spending edges up 0.1% in Feb

WASHINGTON – US consumers spent just slightly more in February even though their income rose by a healthy amount. But economists hope bigger paychecks would give spending a bigger boost in the coming months.

Consumer spending edged up a tiny 0.1 percent 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 non-durable goods such as food and energy coupled with a 0.1 percent fall in durable goods such as automobiles.

Income grew a solid 0.4 percent in February, matching January’s rise. With income growing faster than spending, the savings rate jumped to 5.8 percent of after-tax income – the highest level since December 2012.

Economists said the rise in the savings rate reflects in part the big drop in recent months in gas prices, which acts like a tax cut that leaves more money in consumers’ pockets. Falling gas prices and continued employment growth set the stage for stronger consumer spending in the months ahead as the weather improves.

“Households are still flush with the money saved from the big drop-off in gasoline prices and, with the labor market still on fire, incomes should continue to increase at a solid pace,” said Paul Ashworth, chief US economist at Capital Economics. “That provides the scope for a big gain in consumption in the second quarter.”

Severe winter weather kept shoppers away from the malls and auto showrooms in both January and February.

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.