Consumers increased spending for a second straight month in February, even though their incomes slipped due to continuing massive layoffs. The Commerce Department reported today that consumer spending edged up 0.2% in February, in line with expectations. That follows a huge 1% jump in January that was even better than the 0.6% rise originally reported.
But the report says incomes fell by 0.2% in February, the fourth drop in the past five months, declines that reflected the sizable number of job layoffs that have been occurring because of the recession. After-tax incomes also fell in February, edging down by 0.1%. With incomes down while spending rose, the personal savings rate dipped slightly to 4.2% in February, compared to 4.4% in January. Still, the recent performance marks the first time that the savings rate has been above 4% in more than a decade. Economists believe that the deep recession, already the longest in a quarter-century, will continue prompting consumers to do more to trim spending and boost their savings.
