February was not a great month for household budgets

The Bureau of Economic Analysis released that month’s personal consumption expenditures report on Thursday. The overall price index was up 0.4% compared to January, and up 2.8% from a year ago.

Stripping out volatile food and energy prices, that annual inflation was an even 3%. That comes as disposable income ticked down by 0.1% compared to January. And yet, consumers were still spending money in this economy.

Real PCE, which is how many goods and services consumers bought in February adjusted for inflation, ticked up by 0.1% from January.

“The American consumer has been remarkably resilient, given a whole set of incredible shocks that have occurred over the last year,” said Randy Kroszner, an economics professor at the University of Chicago.

Kroszner said Thursday’s report suggests that resilience has basically continued, at least through February.

“The consumer is sort of moving along — not strongly, not weakly — continuing to buy goods,” he said.

Vehicle sales, for one, rose in February. But the uptick in spending was largely a product of higher prices, not household financial strength, said RSM economist Tuan Nguyen.

“The short story is consumers are starting to feel the squeeze,” he said.

Personal savings were down in February as disposable income fell, though Nguyen said that could be a blip.

“Some of that was just the weather,” he said.

February was cold and stormy for the East Coast, which may have hurt hiring. Nguyen said there could be a bounceback in March.

Speaking of the labor market, Sean Snaith, director of the Institute for Economic Forecasting at the University of Central Florida, said unemployment rates are a key indicator.

“Unemployment rates are still low by historical standards,” Snaith said. “The foundation, the cornerstone of consumer behavior is the labor market.”

But even if consumers are able to keep their jobs, those paychecks might not go as far in the months ahead.

Nancy Vanden Houten, lead economist at Oxford Economics, said Thursday’s PCE report covers the month just before the war in the Middle East.

“We’re expecting some pretty nasty-looking inflation reports for March, and probably in April as well,” she said.

Vanden Houten said those prices increases will pop up in the March Consumer Price Index, which comes out on Friday morning.