US consumer spending rose slightly in February for the third consecutive month, while income growth slowed sharply and overall inflation retreated, the government reported Monday. The Commerce Department said consumer spending increased 0.1 percent last month, matching similar weak gains in January and December. Consumer spending, which accounts for about 70 percent of U.S. economic activity, was previously reported to have increased 0.5 percent in January. Spending was limited by a 0.7 percent drop in purchases of goods last month. Spending on services rose 0.4 percent. The weakness in February spending was expected, following an earlier report showing that retail sales fell last month, pulled lower by declining gasoline sales. Personal incomes rose a modest 0.2 percent in February after a much stronger 0.5 percent gain the previous month. The slowdown reflected a 0.1 percent drop in wages and salaries, the first decline in the category since September. However, the drop in income growth likely is temporary, with the strong jobs market driving wages higher amid pockets of skills shortages. With incomes rising faster than spending, the consumer savings rate rose slightly to 5.4 percent of after-tax income in February, compared to 5.3 percent the previous month. Inflation retreated last month, with a price index for consumer spending declining 0.1 percent after rising 0.1 percent in January. In the 12 months ending in February, the personal consumption expenditures (PCE) price index increased 1 percent. Excluding volatile energy and food costs, core PCE prices gained 0.1 percent in February after advancing 0.3 percent the previous month. Core PCE has risen 1.7 percent over the past 12 months, below the Fed's 2 percent target.
