Washington, March 28 (Bloomberg) -- Americans' spending was unchanged in February for a second straight month as snowstorms shuttered stores and terrorism worries sapped confidence. Income growth slowed. U.S. personal spending held at $7.49 trillion at an annual rate, the Commerce Department said. That completed the first back- to-back months without an increase since December 1990-January 1991, when the U.S. was in recession. Incomes rose 0.3 percent after gaining 0.4 percent. The loss of momentum in personal spending added to evidence that the economy stumbled in the month before the war in Iraq began. Manufacturing slowed, and the economy lost jobs last month. Household spending, which accounts for two-thirds of the economy, may not resume robust growth as confidence drops to decade lows and Americans worry that the war will hurt job prospects, economists said.
``If people see that the job situation is deteriorating and more of their friends are losing jobs, then spending is going to be slow,'' said Kevin Logan, an economist at Dresdner Kleinwort Wasserstein in New York. He had predicted no change in consumer spending. ``If energy prices are high, that's going to siphon spending as well.'' Economists had expected personal spending to drop 0.1 percent after a previously reported 0.1 percent decline in January, based on the median estimate of a Bloomberg News survey of 64 economists. Incomes were expected to rise 0.2 percent after an initially reported 0.3 percent increase. Spending on durable goods, 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, the first month without an increase since September, after rising 1.3 percent. Services, Energy Services spending, which makes up half the report, rose 0.5 percent in February after gaining 0.3 percent in January. Higher energy prices and increased demand amid snowstorms in the Northeast and Midwest partially accounted for the gain. Adjusted for inflation, personal spending fell 0.4 percent after dropping 0.2 percent in January. They were the first back-to- back declines since February-March 2001, when the U.S. was slipping into a recession. Wages and salaries increased 0.3 percent. Disposable personal income, or the money left over after taxes, rose 0.2 percent after jumping 0.4 percent. With Congress preparing another round of tax cuts that would speed up reductions that took hold last year, Americans may have another source of cash. The personal consumption expenditures index, a measure of inflation watched by Federal Reserve Chairman Alan Greenspan, rose 0.4 percent in February after gaining 0.2 percent in January.
Personal Savings Rate
The personal savings rate was 4 percent after registering 3.8 percent in January. The indicator weighs current income from wages, salaries, businesses and government payments against spending. It doesn't account for borrowed money, income from investments, or withdrawals from prior savings. In the four days following the March 19 start of the war, U.S. sales of new cars and light trucks dropped 8 percent from the year-earlier pace, according to a study by J.D. Power and Associates, a consulting firm based in Westlake Village, California. Sales last Saturday were down 12 percent and Sunday, 14 percent, the report said. Wal-Mart Stores Inc., the world's largest retailer, said sales slowed last week as shoppers stayed homed to watch television coverage of the war. US Airways Group Inc., the seventh- largest U.S. airline, said today that it would cut departures 4 percent, a decision that comes as Americans shun air travel during wartime.
Easter Holiday Timing
The timing of the Easter holiday also may depress sales this month. Easter comes in April this year, several weeks later than during 2002. The pause in spending gains is unlikely to extend for many more months, economists said. The weather has improved since mid- February, when snowfall in the Northeast and Midwest closed stores. Economists expect the war in Iraq to be largely wrapped up by June, leading confidence and spending to rebound. Americans are refinancing home mortgages in record numbers, generating of cash that can be used for spending or paying down debt. The Mortgage Bankers Association of America's refinancing index reached a record 9387 in mid-March and last week totaled 8135.7, the third-highest reading ever. The average rate on a 30-year mortgage dropped to 5.42 percent in the week that ended March 7, the lowest since the early 1960s, and was 5.81 percent last week, still low enough to encourage refinancing. //www.quote.bloomberg.com