Crushing inflation: US consumers use savings to pay for basics

Americans' savings rate dropped last month as new figures showed that consumers are using more of their disposable income to cope with the rising cost of food and petrol.

The savings rate declined to 5.8pc in February from 6.1pc in January, as incomes rose a smaller-than-forecast 0.3pc on the month, the Commerce Department said.

In a blitz of data at the start of the week, a separate report showed that consumer spending climbed 0.7pc last month, a better number than forecast, which was welcomed by markets.

Sharp increases in the cost of food and petrol are tempering some of the optimism about a pick-up in growth that many on Wall Street began the year with.

While most economists still expect the world's biggest economy to beat the 2.9pc growth it recorded in 2010, few believe consumers can now match this quarter the performance they put in last quarter when their spending grew at the fastest rate since before the crisis.

"The data provide yet more evidence that higher prices are denting economic growth," said Paul Dales, senior US economist at Capital Economics. (read more)