Consumers rein in spending as U.S. economy slows

WASHINGTON- U.S. consumer spending posted a tiny gain for the third straight month in February while income growth slowed sharply.

The Commerce Department says consumer spending edged up 0.1 percent in February, matching similar lackluster gains in January and December. The agency also cut the spending figure for January to less than 0.1 percent, down from an initial estimate of 0.5 percent.

"Spending was disappointing when we include the downward revision to January," said Peter Boockvar, chief market analyst with research firm The Lindsey Group, in a note.

So-called core consumer spending, which excludes volatile energy and food prices, is growing at a year-0ver-year rate of 1.7 percent.

Personal incomes rose a modest 0.2 percent in February after a much stronger 0.5 percent rise in January. The slowdown reflected a 0.1 percent drop in wages and salaries, the first drop in this key category since September.

Despite recent weakness, economists are still looking for consumer spending to accelerate this year as solid gains in employment boost incomes and fuel more spending.

"We continue to expect consumers to drive the expansion this year, even as the gas windfall fades, amid support from solid job growth and low borrowing costs," Sal Guatieri, senior economist with BMO Capital Markets, told clients in a note.

A key price gauge followed by the Federal Reserve showed prices fell 0.1 percent in February and are up just 1 percent over the past 12 months.

The National Association for Business Economists (NABE) on Monday trimmed its 2016 forecast for real personal consumption expenditures -- a key gauge of consumer spending -- to 2.8 percent, down from a December forecast of 3 percent.

The group also predicts weaker growth in corporate profit and the economy than they were predicting late last year. The NABE survey finds that most business economists have lowered their outlook for economic growth in 2016, and now expect that the U.S. will grow 2.2 percent this year, on average.

That's down from a December estimate of 2.6 percent growth. Most economists are lowering their growth outlook for 2017 as well.