Consumer spending up again

WASHINGTON - U.S. consumers increased spending in February for a second straight month even though their incomes slipped because of continuing layoffs, the government reported yesterday.

The Commerce Department said consumer spending edged up 0.2 percent last month, in line with expectations. That follows a huge 1 percent jump in January that was even better than the 0.6 percent rise originally reported.

But the report also showed that incomes fell by 0.2 percent in February, the fourth drop in the last five months, declines that reflected the sizable number of layoffs that have been occurring because of the recession, now 16 months long.

The figures offer a picture of an economy that remains in recession, while no longer worsening.

"We're certainly not out of the woods by any means, but perhaps we're seeing some signs of stabilization," Jay Bryson, a global economist at Wachovia Corp. in Charlotte, N.C., said.

With incomes down while spending rose, the personal savings rate dipped slightly to 4.2 percent in February compared with 4.4 percent in January. Still, the latest two-month performance marked the first time that the savings rate has been above 4 percent for two consecutive months 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. And that could make it more difficult for the country to pull out of the recession since consumer spending accounts for about 70 percent of economic activity.

The back-to-back increases in consumer spending in January and February followed six straight declines, from July through December.

The slump in spending was the major factor pushing overall economic activity down during that period.

Many economists believe that the overall economy will continue shrinking during the current quarter and in the April-June quarter. They do not see growth returning to the economy until the second half of this year.

A price gauge tied to consumer spending rose by 0.3 percent in February and was up 0.2 percent excluding food and energy, indicating that the recession has contributed to a significant moderation in inflation pressures.

Separately yesterday, the Reuters/University of Michigan index of consumer sentiment was 57.3 in March after a 56.3 reading in February. The index continues to hover near the 28-year low of 55.3 reached in November.