- The Washington Times - Friday, March 28, 2003

WASHINGTON, March 28 (UPI) — The Commerce Department said Friday consumer spending was unchanged in February for the second consecutive month as winter storms kept shoppers at home.

The government agency said consumer spending, which includes consumer purchases of durable and nondurable goods, and services, was unchanged at an annual rate of $7.49 trillion as major snowstorms closed stores in the Northeast and the Midwest during the month.

Most economists on Wall Street were expecting spending to decline 0.1 percent after a revised unchanged performance in January, which the government originally reported as easing 0.1 percent.

The last time spending posted two consecutive months without any increase was back in December of 1990 and January 1991, when the United States was preparing for its first war in the Gulf.

The government agency also reported personal income, which is the dollar value of income received from all sources by individuals, rose 0.3 percent after rising a revised 0.4 percent in January, which was originally reported as improving 0.3 percent.

Most economists were expecting personal income to rise 0.2 percent during the month.

The income and outlays data are another handy way to gauge the strength of the economy and where it is headed.

Income gives households the power to spend and/or save. Spending greases the wheels of the economy and keeps it growing. Savings are often invested in the financial markets and can drive up the prices of stocks and bonds. Even if savings simply go into a bank account, part of those funds are typically used by the bank for lending and therefore contribute to economic activity.

The consumption, or outlays, part of the report is even more directly tied to the economy, which usually dictates how the markets perform.

Consumer spending accounts for two-thirds of the economy, so if you know what consumers are up to, you'll have a pretty good handle on where the economy is headed. Needless to say, that's a big advantage for investors.

The latest report showed spending on durable goods, or items made to last three years or more, fell 2.2 percent in February after dropping 4.9 percent in January.

Purchases of non-durable goods were unchanged during the month after rising 1.3 percent a month earlier.

The government said services spending, which makes up half the report, rose 0.5 percent in February after rising 0.3 percent in January.

The personal consumption expenditures index, a measure of inflation watched by Federal Reserve Chairman Alan Greenspan, rose 0.4 percent in February after rising 0.2 percent in January.

The report showed wages and salaries rose 0.3 percent and disposable personal income, or the money left over after taxes, rose 0.2 percent after jumping 0.4 percent.

The report also showed the personal savings rate rose to 4 percent from 3.8 percent in January. The indicator weighs current income from wages, salaries, businesses and government payments against spending. It does not account for borrowed money, income from investments, or withdrawals from prior savings.

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