Personal income increased

The Commerce Department said personal income increased 0.5% in February, exceeding the 0.3% increase expected by economists surveyed by Briefing.com. January's gain was 0.3%.

In inflation-adjusted dollars, spending by individuals remained unchanged at 0.1%, in line with forecasts. Spending by individuals in current dollars rose 0.4%, also matching January's rate and economists' forecasts.

"The economy is weakening and household finances are being strained," Bernard Baumohl, executive director of The Economic Outlook Group, said.

A measure that tracks prices consumers pay on items excluding food and energy rose 2%over the same period last year, suggesting that inflation is increasing at a moderate rate.

"This is a fairly decent report," said Wachovia economist Adam York. "Inflation is back at the top of the Fed's comfort zone."

However, consumer spending remains weak, York said, and current data suggest it will remain so in the near term and possibly decline in the first quarter.