US personal spending rose 0.6%

Mar 30 | Updated: Mar 31 2007, 06:07am hrs
Consumer spending in the US rose more than forecast last month and a measure of prices accelerated, validating the Federal Reserves concern that inflation remains the biggest risk for the economy. The 0.6% gain in spending followed a 0.5% January increase, the Commerce Department said on Friday in Washington. The Federal Reserves preferred measure of inflation rose 0.3%, the most since August, after rising 0.2% a month earlier.

The report, which also showed an increase in incomes, suggests the economy will weather the slumps in housing and manufacturing that have slowed growth. The rise in inflation makes it likely Fed policy makers will keep interest rates unchanged in coming months.

The Fed wont be able to back off on rates because inflation is high and the consumer still looks to be alive and well, said Robert Gay, managing director at Fenwick Advisers LLC in Rye, New York and a former Fed economist. The Fed is still in a predicament.

Bloomberg