U.S. consumer spending rose moderately in February, and while inflation cooled, it remained high enough to possibly allow the Federal Reserve to raise interest rates one more time this year.
The slowdown in consumer spending reported by the Commerce Department on Friday followed the largest increase in nearly two years in January. That, together with February's small gain put consumer spending on track to surge this quarter after growing at its slowest pace in 2-1/2 years in the fourth quarter.
Consumers increased spending on housing and utilities as well as on healthcare, but cut back on spending at restaurants, bars and hotel accommodation. Overall, services spending rose 0.2% after advancing 1.2% in January. "The economy looks strong today, but the outlook is still in doubt as banks may pull back on the credit they provide to help the economy grow," Christopher Rupkey, chief economist at FWDBONDS in New York.INFLATION COOLING
Excluding the volatile food and energy components, the PCE price index climbed 0.3% after increasing 0.5% in January. The so-called core PCE price index rose 4.6% on a year-on-year basis in February after gaining 4.7% in January. The Fed tracks the PCE price indexes for its 2% inflation target.
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