U.S. consumer spending rose marginally for a second straight month in February as households boosted savings, the latest indication the economy lost momentum in the first quarter.
The Commerce Department said on Thursday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.2 percent last month after a similar gain in January.
Spending on long-lasting goods, such as motor vehicles, rebounded 0.2 percent after tumbling 1.5 percent in January. Outlays on services rose 0.3 percent, matching January's increase. Economists polled by Reuters had forecast consumer spending increasing 0.2 percent in February.
There was also a moderation in monthly inflation readings after prices pushed higher in January. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components rose 0.2 percent last month after advancing 0.3 percent in January.
That lifted the year-on-year increase in the so-called core PCE price index to 1.6 percent, the biggest gain since February 2017, from 1.5 percent in January. The core PCE index is the Federal Reserve's preferred inflation measure. It has been below the U.S. central bank's 2 percent target since mid-2012.
Economists believe the annual core PCE price index could accelerate to 1.9 percent in March as last year's weak readings drop out of the calculation.
The steady rise in inflation last month also helped curb consumer spending. When adjusted for inflation, consumer spending was unchanged in February after falling 0.2 percent in the prior month. That suggests a sharp slowdown in consumer spending in the first quarter after it surged at an eye-popping 4.0 percent annualized rate in the fourth quarter.
The tepid consumer spending added to data on trade, housing and business spending on equipment that have left economists anticipating moderate economic growth in the first quarter.
The Atlanta Fed is currently forecasting GDP growth rising at a rate of 1.8 percent in the January-March period. The economy grew at a 2.9 percent pace in the fourth quarter.
In February, personal income rose 0.4 percent and has now increased by the same margin for three straight months. Wages increased 0.5 percent last month after climbing 0.6 percent in January.
Savings increased to $497.4 billion in February, the highest level since August 2017, from $471.3 billion in the prior month. The saving rate rose to a six-month high of 3.4 percent from 3.2 percent in January.