U.S. consumer spending rose moderately in February, and while inflation cooled, it remained elevated enough to possibly allow the Federal Reserve to raise interest rates one more time this year.
The slowdown in consumer spending reported by the Commerce Department on Friday followed the largest gain in nearly two years in January. Consumer spending, which remains supported by a tight labor market, appears on track to pick up this quarter after growing at its slowest pace in 2-1/2 years in the fourth quarter.
Spending last month was supported by both goods and services. Consumers increased spending on housing and utilities as well as on healthcare, but they cut back on spending at restaurants, bars and hotel accommodation. Financial market stress following the recent collapse of two regional banks has amplified the risk of a recession later this year. Banks have tightened lending standards, which could make it harder for households to access credit, weighing on demand.
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