Consumer Spending Could Add to GDP in Q1

Washington, DC, March 27, 2009--The Commerce Department reported Friday that consumer spending edged up 0.2% in February, in line with expectations. That follows a huge 1% jump in January that was even better than the 0.6% rise originally reported.

But the report says incomes fell by 0.2 percent in February, the fourth drop in the past five months, declines that reflected the sizable number of job layoffs that have been occurring because of the recession.

February's level of spending was higher than the average seen during the fourth quarter of 2008, signaling that consumer spending could add to economic growth in the first quarter, rather than subtracting as it has done in the past two quarters.
 
Adjusted for inflation, after-tax incomes dropped 0.4% in February, reversing direction following a 1.4% surge in January. Income figures for the first month of the year had received a boost as a result of several one-time factors, including annual cost-of-living raises and a once-a-year technical adjustment to tax payments.
 
Consumer prices increased 0.3% in February for the second month in a row. Core prices, which exclude food and energy inputs to provide a better look at underlying inflationary pressures, also rose, up 0.2%.