Consumer spending in the U.S. rose for the eighth month in a row during February as American’s tapped savings to match accelerating price growth, according to Reuters. On Monday, the Commerce Department reported that consumer spending increased by 0.7% in the second month of the year after adding 0.3% to open 2011, which was just above economists’ forecast for a 0.6% gain. The data showed that spending adjusted for inflation added just 0.3% after no gain the prior month, reflecting the fastest increase in consumer prices since July 2009.
The report found the personal consumption expenditures index added 0.4% in Feburary after adding 0.3% the month before. Paul Dales of Capital Economics said, “The data provide yet more evidence that higher prices are denting economic growth,” with consumer spending expected to slow in the first quarter from the fastest quarterly expansion in four years posted during the last three months of 2010. The closely watched core inflation gauge was up 0.2% in February, and rose 0.9% year-over-year, which is the largest annual gain in four months. Incomes moved up 0.3% from a 1.2% gain previously, while savings slipped by about $35 billion to $676.7 billion.