U.S. inflation-adjusted consumer spending declined in February, suggesting the fastest pace of price increases in four decades is tempering demand.
Purchases of goods and services, adjusted for changes in prices, fell 0.4% from the prior month, following a 2.1% jump in January, according to Commerce Department figures Thursday. The decline was due entirely to a decrease in spending on merchandise.
The personal consumption expenditures price index, which the Federal Reserve uses for its inflation target, increased 0.6% from a month earlier and 6.4% from February 2021, the most since 1982. Unadjusted for inflation, spending advanced 0.2% from January, while incomes rose 0.5%.
The median forecasts in a Bloomberg survey of economists called for a 0.2% decrease in inflation-adjusted spending from the prior month and a 6.4% rise in the price index from a year ago.
After omicron-related volatility in the prior two months, the government’s data suggest American consumers are feeling the pinch of the fastest inflation in decades. Continued strength in the labor market -- along with excess savings -- has provided many households the wherewithal to keep spending, but rapid inflation has eroded wage growth and driven up the costs of necessities like energy, food and rent.
