WASHINGTON - U.S. personal spending accelerated in February at more than twice the rate of income growth as a series of Federal Reserve interest rate increases did little to deter consumers, government figures showed Friday.
Spending increased 1% in February after rising 0.6% in January, the Commerce Department said. Incomes rose 0.4% in February after growing 0.7% the previous month.
"It never stops, does it?" said Tim O'Neill, chief economist at the Bank of Montreal and Harris Bank in Toronto. "The key to this momentum in the economy is consumer spending. The only cloud on the horizon is the move up in interest rates."
The report showed that inflation-adjusted spending - the figure used to compile the consumer spending portion of the government's gross domestic product reports - was on track to have risen at a 7.5% annual rate in the first quarter, according to Bloomberg analytics. If sustained, spending growth would be stronger than the 5.9% rate in the fourth quarter and the fastest pace since the third quarter of 1985.
The rise in spending is boosting factory production. Chicago-area purchasing managers said manufacturing grew faster in March as more companies reported increases in production and inventories. The National Association of Purchasing Management-Chicago said its monthly index of regional manufacturing increased to 57.4 from 56.7 in February.