U.S. consumer spending in January was short of projections while inflation eased, an early read on the economy in the first quarter that may add to concerns about the outlook.
Purchases, which account for about 70 percent of the economy, rose 0.1 percent from the prior month after a downwardly revised 0.6 percent drop, according to a Commerce Department report Friday. Personal income rose 0.2 percent in February, also less than forecast.
The spending figures, which reflected weaker sales of new autos, signals first-quarter growth faces additional headwinds, though surveys show consumers remain generally upbeat despite projections for slower expansion. At the same time, tame inflation reinforces Fed projections for no interest-rate hikes this year.
“Spending numbers were weak, decidedly weak in December, and we got not much of a rebound in January,” said Scott Brown, chief economist at Raymond James Financial Inc., adding that the government shutdown could be responsible for the weakness.
The Fed’s preferred price gauge — tied to consumption — fell 0.1 percent in January from the previous month and was up 1.4 percent from a year earlier, matching the annual projection with the slowest reading since late 2016.