Personal spending rises in February

By Chavon Sutton, staff reporter


NEW YORK (CNNMoney.com) -- Personal spending rose for a fifth straight month in February, while personal income was virtually unchanged, according to government data released Monday.

The Commerce Department said Individual spending rose 0.3%, or $34.7 billion last month. The figure was in line with the 0.3% rise economists expected, according to a consensus compiled by Briefing.com

Personal income climbed $1.2 billion, or less than 0.1%, during the month, after a 0.3% rise in January. The figure was close to the 0.1% rise expected.

"Today's data was clearly consistent with recent trends," said Scott Hoyt, senior director of consumer economics for Moody's Economy. "Spending isn't blowing us away because consumers are clearly suffering from a lack of income."

Disposable income, personal income minus taxes, rose $1.6 billion or about 0.1%, as taxes fell. In January, disposable income dipped 0.2% or $26 billion.

According to the report, Americans saved $340 billion, or 3.1% of their disposable income in February, compared to an upwardly revised $374.9 billion or 3.4% of disposable income in January.

The report follows another from the government on Friday that said economic growth in the fourth quarter of 2009 grew slightly slower than orignally reported. The Commerce Department had said that gross domestic product, a key measure of economic activity, came in at an annualized rate of 5.6%, compared to an original reading of 5.9%.

Consumer led recovery?

Investors have been keeping a close watch on income and personal spending data because consumer spending accounts for two-thirds of U.S. economic activity.

Monday's personal income and spending results show that although the economy's slow recovery is still on track, consumers are still under pressure.

Personal saving dropped for the second straight month, as spending outpaced income. And Hoyt says that personal income, though rising, is essentially flat from last year when transfer payments such as unemployment benefits are excluded.

"Consumers just don't have the financial capability to lead the economy right now," he said. To top of page

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