Spending posted the biggest gain since July in February.
NEW YORK (CNNMoney) -- Consumer spending jumped in February due to higher prices, far outpacing more modest gains in income.
The government reported that spending jumped 0.8% compared to January, the biggest one-month jump since July of last year. But when adjusted for inflation, spending increased only 0.5%, a sign that higher prices for staples such as gasoline was driving much of the increase.
Income rose only 0.2% in the same period, meaning that consumers were dipping into savings to spend at the higher levels. The level of savings fell by $70.8 billion to $438.7 billion. That reduced the so-called savings rate, which compares after-tax income to spending, to 3.7% from 4.3% in January.
The job market has been showing signs of improvement, which is helping to lift overall income.
February's income gain was less than the 0.3% rise forecast by economists surveyed by Briefing.com, while spending was more than forecasts of a 0.6% rise.
But the willingness of consumers to spend is a good sign for economic growth, since consumer spending represents more than two-thirds of the nation's economic activity.
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