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MarketwatchConsumer spending fades in February
Real disposable incomes fall 0.4% as wages drop 0.4%
By Rex Nutting, MarketWatch
10:18 AM ET Mar 27, 2009
WASHINGTON (MarketWatch) -- U.S. consumers retreated in February after splurging in January as income growth stalled, the Commerce Department reported Friday.
Real consumer spending, representing outlays adjusted for inflation, fell 0.2% last month, a reversal after rising by a three-year high of 0.7% in January, the government estimated.
February's level of spending was higher than the average seen during the fourth quarter of 2008, signaling that consumer spending could add to economic growth in the first quarter, rather than subtracting as it has done in the past two quarters.
Economists at Morgan Stanley boosted their forecast for first-quarter consumption to 1.3% annualized growth after a 4.3% decline in the fourth quarter. However, they still see gross domestic product plunging at a 5.1% annual rate in the first quarter, nearly matching the fourth-quarter's 6.3% decline.
Meanwhile, personal incomes fell 0.2% in February as wages declined 0.4%, putting incomes at the lowest level since April. After-tax disposable incomes eased 0.1%.
Economists disagree sharply about where prices are heading. Some say the large amount of idle resources will put downward pressure on prices in coming months, threatening a nasty period of deflation. That's the view of the Federal Reserve and many private-sector economists.
In a separate report, the University of Michigan and Reuters said the consumer sentiment index rose by one point in March to 57.3, still at an extremely low level.
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