American household spending increased slightly in February as income growth slowed and Americans saved more of their incomes.
Personal spending on good and services rose a modest 0.1 percent in February from the prior month, the Commerce Department said Monday. January spending growth was revised down to 0.1 percent from a previously reported 0.5 percent.
Personal income, including earnings from wages and other sources, climbed 0.2 percent after a much strong income growth of 0.5 percent in January. This is the smallest monthly growth for income since September as wages dropped 0.1 percent in February.
“There’s still this sense of more of the same right now -- the consumer is still chugging along, not really strong but not terribly weak, either,” said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida. “Things are a little bit softer than we’d hope to be, but still consistent with the economy growing.”
Households are more cautious on spending money; instead, they saved more at the beginning of 2016. The personal-saving rate in February climbed to 5.4 percent from 5.3 percent in January. This number is much higher than 5.0 percent in December.
The performance of inflation, an indicator that the Fed is closely watching, was depressed by the low energy prices. The personal consumption expenditures price index fell 0.1 percent in February from the prior month. It rose 1 percent from the same time in 2015. Excluding food and energy categories, the price index rose 0.1 percent from January and climbed 1.7 percent from a year earlier, but still below Fed’s target of 2 percent annual inflation rate.
Low inflation rate may have some impact on Fed policymakers’ decisions. With the huge rebound of oil price in March, it is important to see whether Fed will delay another hike in interest rate in the next meeting.