Economic Report: U.S. consumer spending rises slightly, but high inflation is the reason why
The numbers: Consumer spending rose a mild 0.2% in February, but rising prices due to high inflation played a big role and is weighing on the economy.
Economists polled by The Wall Street Journal had forecast 0.5% increase.
One bit of good news: The increase in spending in January was revised up to 2.7% from 2.1%.
Taking the two months together, and consumer spending appears to have gotten off to a healthy start in 2022 and exceeded the rise in inflation.
A key measure of inflation also included in the report, meanwhile, also rose 0.6% last month, government figures showed, so real spending actually declined.
The so-called PCE price index has climbed 6.2% in the 12 months ended in February, marking the biggest increase since January 1982.
Incomes rose 0.5% in February. Wages have also climbed rapidly over the past year, but not as fast as the increase in the cost of living.
Big picture: The economy has accelerated since omicron faded. Americans are still spending plenty of money, while businesses are investing and hiring at a healthy clip. The U.S. is expected to add another half-million new jobs in March.
What remains to be seen is how much high inflation acts as a drag on the economy, especially with the Federal Reserve moving swiftly to raise interest rates to try to tame the rapid increase in prices.
The war in Ukraine and Covid lockdowns in China could are other potential land mines.
Market reaction: The Dow Jones Industrial Average
and S&P 500
were set to open narrowly mixed in Thursday trades.