Gas-pump price increases and food price increases caused about half of
February’s inflation according to the Federal Reserve. The inflation
rate for the past 12 months now stands at 1.6%. At the same time, spending on consumer goods increased during the month. On Monday, 3/29, the Commerce Department projected a 0.7 percent increase in consumer purchases for February, while reported wages and salaries rose only 0.3 percent. Taking into account taxes and the cost of inflation, real consumer income actually dropped 0.1 percent. The personal savings rate dropped to 5.8% from 6.15% in January. So even in these lean times, with fuel and food prices increasing, consumers are choosing to spend rather than save. As a result, personal consumer savings fell from $710.5 billion in January to $676.7 billion. According to fed officials this spending pattern indicates a recovering economy. Retail sales climbed in February by the largest amount in four months, boosted by a jump in auto purchases. “The economic recovery is on a firmer footing,” Fed officials said in a statement after their March 15 meeting.
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