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Consumers spent $103.2 billion more in February than the prior month, a 0.5% gain, data from the Bureau of Economic Analysis showed<\/a> 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%. <\/p>\n<\/div>\n Both the headline and core indexes grew 0.4% compared with January, pointing to stubborn inflation at the end of February \u2014 before the outbreak of the U.S.-Israeli war against Iran sent oil prices soaring.<\/p>\n<\/div>\n 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.<\/p>\n<\/div>\n The data lands at a moment when American households remain under sustained financial pressure<\/a>. 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.<\/p>\n<\/div>\n Retailers and consumer brands have cut prices and emphasized value in response to tighter household budgets. Target $TGT<\/a> announced plans to lower prices on more than 3,000 items, and PepsiCo $PEP<\/a> said it would cut prices on several snack products by up to almost 15%. McDonald’s $MCD<\/a> is also preparing to price U.S. menu items at $3 or less.<\/p>\n<\/div>\n 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.<\/p>\n<\/div>\n 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.<\/p>\n<\/div>\n 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.<\/p>\n<\/div>\n 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.<\/p>\n<\/div>\n