US consumer incomes and spending gained in February even as paychecks were hit by higher social security deductions, the Department of Commerce said Friday.
Consumer spending rose 0.7 percent, or $77.2 billion, from January, while incomes gained 1.1 percent or $143.2 billion.
In January incomes plunged 3.7 percent and spending was up a modest 0.4 percent, according to revised data.
Consumers' pocketbooks were hit by an increase to payroll taxes from January 1 after enjoying a two-year reduction aimed at stimulating the economy.
Households will lose on average about $1,000 a year in disposable income because of the higher deductions.
But January spending was helped, and incomes fell, due to businesses advancing dividend payments and bonuses to December ahead of the onset of higher taxes.
As a result, economists have predicted that it will take a few months to see the real effect of the January 1 tax increases on consumer behavior.
