Inflation, Russian attack: consumer spending slows

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With the double blows of runaway inflation and the ongoing Russian attack on Ukraine, consumer spending in February grew at a slower pace of 0.2%, compared to a revised increase of 2.7% in January, according to Thursday (March 31). report of the US Department of Commerce.

Consumer spending accounts for more than two-thirds of US economic activity. Personal income rose 0.5% in February from January, which was largely flat.

Related: Visa says consumer spending improved in February

Annual inflation, meanwhile, jumped to 6.4% in February, using the department’s personal consumption expenditure price index, which is the Federal Reserve’s preferred gauge.

Annual core PCE inflation – minus food and energy prices – rose to 5.4% last month. The PCE core price index rose 5.2% in the 12 months to January. Inflation is at its highest level since the 1980s.

Spending on goods fell, the report said, marked by lower purchases of motor vehicles as well as reduced consumer spending on food, furnishings, leisure items and clothing. Gasoline spending rose $27.1 billion last month.

With infections of COVID-19 and associated variants largely taking a back seat, spending on indoor dining and travel rose 0.9% in February from January.

Read more: Mastercard retail sales data in February reflects consumers’ underlying desire for normalcy

The savings rate rose to 6.3% from 6.1% in January. Weekly jobless claims rose by 14,000 to 202,000.

Bank of America economist Alex Lin told the Wall Street Journal that strong consumer demand is keeping prices high as businesses have yet to see a reduction in pricing power. This could change, however, especially if consumers start to run out of savings and inflation continues to rise.

Kim Cook, owner of Kansas business Love to Travel, told the WSJ that her customers are booking trips despite high airfare prices and hotel fees.

“They say, ‘I know it’s going to be expensive, but we haven’t been anywhere in two years, we really want to do this,'” Cook said. money to burn”.

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