U.S. consumers seem to be using any savings from lower gas prices to pay off debt and pad their savings accounts, with spending rising just .1% in February after a .2% drop in January, according to the Commerce Department’s consumer spending report for the month. Consumer savings reached a two-year high, according to the report.
Economists had expected closer to a .2% gain, a sign that the U.S. economy hit a soft patch in Q1.
Spending has also faced headwinds from severe weather in certain areas, a labor crisis at West Coast ports, slowing economies in Europe and Asia, and a strong dollar.
Just when the economy seemed to be losing its capriciousness, this spending report for February shows that things slowed down a bit. And consumers are being cautious, at least for now. Economists don’t seem alarmed, though, because the labor market is expected to pick up.
"We expect spending activity to rebound meaningfully in the coming months as the weather setback dissipates, but the very weak tone in the data will likely continue to temper the impulse at the Fed to tightening policy in the near-term," said Millan Mulraine, deputy chief economist at TD Securities in New York, told CNBC.