Feb 29, 2008

Spending Flat as Inflation PersistsBy Michael M. GrynbaumNYTimes.com

Consumer spending, which accounts for more than two-thirds of gross domestic product, was flat in January for the second month in a row, when adjusted for inflation, the Commerce Department said on Friday. Other reports showed a decline in consumer confidence and diminished business activity in the Midwest.

Investors absorbed the economic data and pushed stocks lower on negative news from the American International Group, Dell and Sprint Nextel.

The Dow Jones industrials closed down 315.79, or 2.5 percent. The Standard & Poor’s 500-stock index and the Nasdaq composite registered similar percentage declines.

On an absolute level, Americans spent more last month, as spending outlays increased 0.4 percent after rising 0.3 percent in December.

But the products they bought were more expensive, too. Prices are rising rapidly; in January, they were up 3.7 percent in January compared with those a year ago, the fastest rate of growth in more than two years.

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