Consumer spending increased in February but at a slower pace than expected amid rising inflation.
According to new data released by the Commerce Department on Thursday, consumer spending increased 0.2% last month to $34.9 billion. Adjusted for inflation, however, spending fell by 0.4%. Data for January was revised higher to show outlays rebounding 2.7% instead of 2.1% as previously reported.
The slight increase in spending last month reflected an increase of $93.8 billion in spending for services that was partly offset by a $58.9 billion decrease in spending for goods. Within services, the largest contributor to the increase was spending for food services and accommodations. Within goods, spending on motor vehicles and parts was the leading contributor to the decrease.
The Commerce Department pointed to inflation as the cause of these numbers in its report on Thursday, stating that it rose 0.6% last month alone for a total 6.4% increase from one year ago in both goods and services. Energy prices increased 25.7% while food prices increased 8.0%. Excluding food and energy, prices in February increased 5.4% from one year ago.
The same report showed that personal income increased 0.5% in February to $101.5 billion. The Commerce Department said that this increase in compensation was partly offset by a decrease in government social benefits. Within compensation, the increase reflected surges in both private and government wages and salaries. Within government social benefits, a decrease in “other” benefits was partly offset by increases in Medicare and Medicaid. Within “other” benefits, the decrease primarily reflected a decline in the Provider Relief Fund as well as a decrease in Supplemental Nutrition Assistance Program benefits.
This news comes as the Bureau of Labor Statistics reported earlier this month that consumer prices rose by 7.9% in February compared to a year ago. This number was up from the 7.5% growth in January and represented the highest inflation rate since the 12-month period ending in January 1982.
Footwear prices are going up too. According to data from the Footwear Distributors and Retailers of America (FDRA), footwear prices rose 7% in February year over year. This marks the second fastest year over year increase in 33 years. Men’s footwear was up 5.3%, women’s was up 6.8%, and kids’ was up 10.3%.
This rise in prices is finally being addressed by the Federal Reserve this month. The Fed raised its policy interest rate by 25 basis points in March, the first hike in more than three years as it aims to combat inflation.