Commerce Department data showed that consumer spending, which accounts for two-thirds of U.S. economy activity, rose by 1.8% in January, the largest increase in nearly two years and exceeding analyst estimates, according to a Reuters poll.
Furthermore, the personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure, accelerated by 0.6% last month, the biggest increase in six months, bringing the index to 5.4% for the 12 months through January.
The strong data deepened a market sell-off across most equities, with the MSCI world equity index, which tracks shares in 50 countries, shedding 1.17%. European stocks fell 1.04%.
“The fact we’ve got another data item that shows the economy is not slowing enough to hopefully give the Fed confidence that they’re in front of the inflation problem – that’s why the market is down,” said Robert Stimpson, portfolio manager at Oak Associates Funds in Akron, Ohio.
