Consumer Spending and Income Rise as Inflation Bubbles

by: James Picerno

Personal income and spending rose again last month, the U.S. Bureau of Economic Analysis reports, although the numbers are tainted somewhat by the fact that inflation ticked up as well.

In the meantime, there’s no denying the trend in spending and income. Personal consumption expenditures rose for the eighth consecutive month, posting their biggest rise in February since last October. Disposable personal income advanced for five straight months through February.

“The rise in food and energy prices is not derailing consumer spending, it’s just taking a little bit of steam out of it,” Julia Coronado, chief economist at BNP Paribas, tells Bloomberg.

How does the longer-term trend compare? There’s still a favorable wind blowing. Income and spending continue to inch higher on a year-over-year basis.

Comparing private sector wages, industrial production and private nonfarm payrolls also suggests that positive momentum may have some legs in the months ahead, perhaps spilling over into job growth.

But inflation is worrying some analysts. Although consumer spending rose 0.7% last month, after inflation the rise was cut by more than half to a 0.3% gain. "The data provide yet more evidence that higher prices are denting economic growth," Paul Dales, a senior U.S. economist at Capital Economics,

tells

Reuters.