US consumer spending soft, inflation benign as economy slows

WASHINGTON: U.S. consumer spending barely rose in January and income increased modestly in February, suggesting the economy was fast losing momentum after growth slowed in the fourth quarter.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent as households cut back on purchases of motor vehicles. Spending fell 0.6 percent in December. But the Fed's decision to shelve further monetary policy tightening could prop up the interest-rate-sensitive housing market. A second report on Friday from the Commerce Department showed new home sales rose 4.9 percent to a seasonally adjusted annual rate of 667,000 units in February, the highest level since March 2018.

"Spending will downshift to the slowest pace in a year in the first quarter," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. With demand softening, inflation pressures were tame in January. The personal consumption expenditures price index fell 0.1 percent, reversing December's 0.1 percent gain.

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