(RTTNews) – Personal income in the United States rose in line with economists’ estimates in February, according to a report released Thursday by the Commerce Department.
The report showed personal income rose 0.5% in February after rising a revised 0.1% in January.
Economists expected personal income to climb 0.5% from the unchanged reading originally reported for the previous month.
The growth in personal income occurred as an increase in compensation more than offset a decrease in government social benefits.
Personal disposable income, or personal income less current personal taxes, rose 0.4% in February after rising 0.1% in January.
Excluding price changes, however, real disposable income fell 0.2% in February after falling 0.4% in January.
“Inflation continues to erode household purchasing power as real disposable income fell for a seventh straight month,” said Lydia Boussour, chief US economist at Oxford Economics.
Meanwhile, the Commerce Department said personal spending rose 0.2% in February after jumping an upwardly revised 2.7% in January.
Personal spending is expected to rise 0.5% from the 2.1% jump originally reported the previous month.
The report showed that real personal spending, which excludes price changes, fell 0.4% in February after climbing 2.1% in January.
With income rising more than spending, personal savings as a percentage of disposable income rose to 6.3% in February from 6.1% in January.
A reading of inflation that would be preferred by the Federal Reserve showed the annual rate of growth in core consumer prices accelerating to 5.4% in February from 5.2% in January.
“American consumers will face tough choices in the months ahead as soaring prices for non-discretionary items such as food, energy and housing strain their budgets and lead them to cut back on some purchases and dipping into their savings,” Boussour said.
She added: “But robust labor income growth, record levels of household wealth and a large savings surplus worth 13% of GDP mean consumer spending should remain well supported.”
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