U.S. consumer spending up modestly, incomes fall

WASHINGTON Fri Mar 27, 2009 10:22am EDT

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WASHINGTON (Reuters) - U.S. consumer spending rose for a second straight month in February, while incomes reversed the previous month's gains, government data showed on Friday.

The Commerce Department said spending increased 0.2 percent, in line with market expectations, after rising 1 percent in January. However, after adjusting for inflation, consumer spending in February fell 0.2 percent.

U.S. equity index futures were steady at lower levels after the data, while government bond prices held at higher levels and the U.S. dollar was little changed.

Incomes fell by 0.2 percent after January's revised 0.2 percent rise. Analysts polled by Reuters had forecast incomes to fall 0.1 percent.

Savings fell slightly to an annual rate of $450.7 billion. The savings rate was at 4.2 percent in February, indicating that households were still remaining frugal.

Prices edged up in February, with the overall personal consumption expenditures price index rising 1 percent on a year-over-year basis from 0.8 percent in January. Excluding food and energy, the index rose 1.8 percent after gaining 1.7 percent in January.

"The core price index was on the high end of expectations. This will fan inflation fears. The Fed is sowing the seeds of future inflation," said Scott Brown, chief economist at Raymond James & Associates in St Petersburg, Florida.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

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