US consumer spending increased by the most in seven months in February as households shook off a rise in fuel prices, suggesting the economy may not have slowed as much this quarter as economists had thought.
The Commerce Department said today consumer spending rose 0.8% as spending on long lasting goods, like cars, rose sharply.
January's spending was revised up to 0.4% from a previously reported 0.2% gain.
Economists had expected spending, which accounts for two-thirds of US economic activity, to rise 0.6% last month.
When adjusted for inflation, spending rose 0.5%, the largest gain since September, after gaining 0.2% in January. That could cause analysts to raise their forecasts for 2% US growth in the first quarter.
Consumer spending rose at a 2.1% rate in the fourth quarter and last month's increase suggested consumers were taking surging petrol prices in stride, and saving less to supplement their low income.
Last month, income edged up 0.2% after rising by the same margin in January. The increase was below economists' expectations for a 0.4% rise.
Taking inflation into account, the amount of income available to households after accounting for taxes and inflation, declined for a second month.
With spending outpacing income, the saving rate dropped to 3.7%, the lowest rate since August 2009.
The report showed mild inflation pressures, which should help to support spending. A price index for personal spending rose 0.3% in February after increasing 0.2% the previous month.
A core inflation measure, which strips out food and energy costs, edged up 0.1% last month after rising 0.2% in January. The annual increase was 1.9%. The Federal Reserve likes this measure to be close to 2%.
