Consumers spent $103.2 billion more in February than the prior month, a 0.5% gain, data from the Bureau of Economic Analysis showed Thursday, while household income slipped by $18.2 billion, or 0.1%. On a year-over-year basis, the overall PCE inflation index rose 2.8% compared to February 2025, while the core measure, which strips out food and energy and is watched closely by the Federal Reserve, climbed 3.0%.
Both the headline and core indexes grew 0.4% compared with January, pointing to stubborn inflation at the end of February — before the outbreak of the U.S.-Israeli war against Iran sent oil prices soaring.
The data release arrived later than planned. The BEA had originally targeted March 27, 2026, but the fall government shutdown pushed the publication date back.
The data lands at a moment when American households remain under sustained financial pressure. Households are still paying for services and necessities, but pulling back on discretionary goods. The University of Michigan’s preliminary March sentiment reading fell to 55.5, and according to Bankrate, 54% of Americans reported saving less for unexpected expenses because of inflation or rising prices. Consumer prices are about 26% higher than they were in December 2019.
Retailers and consumer brands have cut prices and emphasized value in response to tighter household budgets. Target $TGT announced plans to lower prices on more than 3,000 items, and PepsiCo $PEP said it would cut prices on several snack products by up to almost 15%. McDonald’s $MCD is also preparing to price U.S. menu items at $3 or less.
The Federal Reserve left interest rates unchanged at 3.5% to 3.75% at its most recent meeting. Chair Jerome Powell said the current policy stance remained appropriate and that inflation was still somewhat elevated amid the war in the Middle East, where a fragile ceasefire took hold this week.
Goods purchases in February accounted for $58.7 billion of the monthly consumption gain, with service-sector outlays adding another $44.5 billion. In real terms, PCE increased 0.1% to $17.3 billion.
After-tax income fell $18.3 billion for a 0.1% decline, leaving households with a saving rate of 4.0%, or $931.5 billion in aggregate savings.
The drop in personal income was driven primarily by declines in personal dividend income, which fell $39.7 billion, and personal current transfer receipts, which dropped $21.6 billion. The transfer receipts decline reflected a $34.4 billion drop in other government social benefits tied to estimated Affordable Care Act enrollments. Gains in compensation and farm proprietors’ income partially offset those decreases.
BEA will publish figures for March 2026 on April 30.
