US consumer spending barely rose

[NEW YORK] US consumer spending barely rose in February against a backdrop of persistent inflation that’s set to accelerate due to the Iran war.

Inflation-adjusted consumer spending increased 0.1 per cent after stagnating in January, continuing an extended period of lacklustre demand, a report from the Bureau of Economic Analysis (BEA) showed on Thursday (Apr 9).

The so-called core personal consumption expenditures price index, which excludes food and energy items, increased 0.4 per cent from January. From the prior year, the Federal Reserve’s preferred gauge of underlying inflation advanced 3 per cent.

Spending on goods rose for the first time in three months, driven by a rebound in motor vehicle purchases. Services outlays edged up, fuelled by transportation services.

The latest spending figures are consistent with a consumer who has grown more cautious over the last six months amid cost-of-living concerns and a sluggish job market. Real disposable income declined 0.5 per cent, the most in nearly a year, according to the BEA.

Inflationary pressures have mounted more recently as the war drives up the cost of fuels and materials. Some companies have already started to pass along those costs or announced plans to do so. Higher tax refunds helped support spending in February, but the rise in energy prices risks blunting that tailwind in the months ahead.

“When households are in the midst of or are anticipating financial hardship, they pull back on spending in an act of self-preservation,” said Elizabeth Renter, senior economist at NerdWallet, a personal finance platform. “This can drive real changes to the larger economy, in the form of slower growth.” 

Delta Air Lines said it’s “looking to do more” fare increases beyond what has already been levied. And the US Postal Service plans to raise prices by 8 per cent on some packages until mid-January of next year.

While oil prices tumbled on Wednesday after the US and Iran agreed to a two-week ceasefire in exchange for Teheran allowing safe passage through the Strait of Hormuz, Brent crude futures are still about US$25 a barrel more expensive than before the war.

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A more updated picture of inflation is due Friday with the March consumer price index report from the Bureau of Labor Statistics. Economists expect a 0.9 per cent increase in the CPI – the sharpest one-month advance since 2022 – after the war pushed gas prices up by over US$1 per gallon.

The BEA data also showed the firm PCE price index was concentrated in goods. Prices of recreational goods, clothing and energy picked up from the start of the year.

At the same time, a closely watched metric of services inflation that excludes energy and housing climbed 0.2 per cent, the smallest advance since September.

Personal income, a metric not adjusted for inflation, decreased, primarily reflecting declines in dividend income and personal transfer receipts.

Wages and salaries rose 0.2 per cent, while income on assets – a key support for wealthier households – declined. The saving rate dropped to 4 per cent.

Separate BEA figures showed the economy expanded at a slower pace than previously estimated in the final months of 2025. Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased at a 0.5 per cent annualised rate in the fourth quarter.

Pre-tax corporate profits rose 6 per cent in the fourth quarter, the most in more than three years.

Other data out Thursday from the Labor Department showed recurring applications for jobless benefits fell to the lowest level in almost two years, adding to evidence of stabilisation in the labour market. BLOOMBERG