Based in large part on a recently improving labor market, the current conditions component remains firm, up from 83.0 to 84.2, however, the expectations component more than offset that gain, down from 70.3 to 68.0.

It’s a good think that equity markets don’t have a gas tank to fill every week or they too might think about pulling back but, so far, they show little sign of doing so, though that could soon change given that inflation expectations show signs of stirring to life.

Survey respondents ratcheted up their one-year outlook on consumer prices from an increase of 3.3 percent to 4.0 percent in a delayed reaction to rising pump prices that the Energy Department said gained another 4 cents over the last week, rising to a national average of $3.83 per gallon.

Five-year inflation expectations (the measure watched more closely by Fed economists) rose just one-tenth to 3.0 percent, indicating that, like Fed Chief Ben Bernanke, most Americans see rising gas prices as being temporary, a belief that, unlike Bernanke’s, could prove to be temporary itself.

Excluding motor vehicles, retail sales rose 0.9 percent last month and, excluding both autos and gasoline, sales rose just 0.6 percent.

Surging pump prices more than offset falling demand as gasoline station sales jumped 3.3 percent in February after an increase of 1.9 percent the month prior. Motor vehicle sales rose 1.6 percent last month following a decline of 1.6 percent in January.

Clothing sales rose 1.8 percent, however, here too, rising prices played a significant role in the sales gains as the Labor Department recently reported that, over the last three months, the cost of apparel has been rising at an annual rate of more than 5 percent.

An unusually warm and dry winter has also spurred many purchases at home improvement stores, as sale there rose 1.4 percent for the second month in a row. Recall that the retail sales figures are adjusted for seasonal variations and holidays, but not rising prices, all of which makes the February surge less than what it appears.

I don’t know what would make anyone think that the 70 percent figure is anything but worrisome, especially with government spending accounting for another 20 percent or more. That leaves the combination of domestic investment and net exports contributing less than 10 percent (net exports being negative for quite some time), yet, economists and news anchors repeat this “consumers account for 70 percent of the economy” over and over as if it were some kind of economic law which it is certainly not.

Future historians will no doubt look back someday while scratching their heads and say, “I don’t know why on earth they would have thought that was sustainable”.

Andrew Schiff, brother of  doomsayer Peter Schiff of Euro Pacific Capital, laments the high cost of private school tuition, living in New York City, and four month long summer vacations in Connecticut that have become difficult to bear on his $350,000 income.

While Andrew won’t get much sympathy from the rest of the country that struggles to make ends meet on a 10th of that income or less – and that is, perhaps, the more important story here – it does illustrate the point that, at just about every income level, many Americans are doomed to financial failure simply because they spend too much money.

I’ll never forget Lakers owner Jerry Buss who, back in the 1980s, famously said that all you have to do to become wealthy is to spend less than you make and to keep doing this over many, many years.

It’s a simple formula, actually.

Yet, in a society where image seems to be everything and buying things you don’t need with money you don’t have is a way of life, that simple wisdom seems about as relevant today as the idea of paying off your mortgage.

I find it hard to conjure up much sympathy for people like Schiff and the primary reason why is that, for decades, I’ve approached personal finances in a completely different way, one like Jerry Buss recommended and which may someday soon come back in style.

Not long ago, a high school buddy of mine who worked on Wall Street for many years asked me how my wife and I were able to quit our cubicle jobs while still in our mid-40s and my answer to him was simple — it’s not just about income, it’s about spending.

Of course, he lives in New Jersey where property taxes are sky high and, as is the case in New York City, other living expenses make a low-cost lifestyle nearly impossible.

I don’t know.

To me, it’s just simple addition and subtraction (with only a little multiplication and division) and having the ability to be flexible in your decision making, but, focusing more on the spending side of one’s personal finances over the long-term seems to be a much better approach to managing your finances than trying to always grow your income and then watch your spending rise to that same level.

Not surprisingly, some who adopt the latter approach find themselves “freaking out” somewhere on a California freeway as Andrew Schiff did not long ago.

Of course, not many Americans like the whole idea of spending less, so, I wouldn’t expect that a new austere culture will develop here in the U.S. very rapidly.

If there is one thing the U.S. is not, it’s Germany (though, if you’re half German, as I am, that seems to be helpful in this particular situation).

More likely, it will be a forced change, but one that will surely come, and not one that many will enjoy, though, embracing this change sooner rather than later might be a good idea.

I can’t tell you how good it feels sometimes to sit back and think how comfortably my wife and I could live here in Montana (if need be) on such a little amount of money – gasoline is relatively inexpensive, taxes are low, and outdoor activities are abundant, cheap, and uncrowded.

Having zero debt is key – another foreign concept to most Americans.

Clearly, it’s all a matter of personal preference and happiness. For all I know, maybe some people are truly happier when they’re griping about one thing or another that they have the ability to change, but, for whatever reason, choose not to.

My advice to young professionals – think hard about what you do with the money you earn because little things over long periods of time really add up.

What’s interesting about the graphic (as well as with other similar surveys) is that we’ve been here before but have never been able to move higher.

In a separate, less frequently conducted survey at Gallup, the percentage of Americans who think the U.S. economy is growing has reached a new recovery high at 40 percent. While this is good news, it’s worth pointing out that some 46 percent of those polled say the economy is still either in recession or depression.

Like the other surveys, recent readings for the Gallup poll are more often associated with recessions than recoveries. We’ll probably find out this spring whether Americans’ dour mood has been justified or if the economic recovery really is as good as it looks.

Flagging auto sales were the primary reason for the January total coming in below consensus estimates for a gain of 0.6 percent. Auto sales fell 1.1 percent last month, pacing the declining categories, while sales at general merchandise stores (up 2.0 percent), gas stations (up 1.4 percent), and grocery stores (up 1.3 percent) led the advancing categories.

The current conditions component within the sentiment survey dropped from a lofty 84.2 in January to 79.6 in February while the expectations component fell from 69.1 to 68.0.

Recall that, while these readings are a great improvement from the lows seen last summer as elected officials were debating a debt ceiling increase, they remain levels more often associated with recessions than recoveries as depicted in this graphic from the St. Louis Fed. In fact, during the 2001 recession, consumer sentiment never fell below 80.

Rising optimism about an improving labor market was more than offset by higher gasoline prices (and perhaps the hangover of holiday credit card bills coming due), though higher prices at the pump didn’t show up in the inflation expectations survey as the one-year outlook for the rise in consumer prices fell from 3.2 percent to 3.1 percent while the five-year view of inflation rose two tenths of a percent to 2.9 percent.

And optimistic ‘Mericans tend to borrow and spend, more of that being confirmed in yesterday’s report on consumer credit that showed another monthly gain for outstanding credit card balances after declining steadily for years after the 2008 financial creisis and recession. Jake has details on that in this item at EconomPicData.

Importantly, this is the first major gauge of the mood of the consumer to reverse course in recent months as, apparently, those holiday credit card bills have begun to take a toll.

Recall that a surprising surge in credit card usage during the fourth quarter was credited with driving holiday sales higher and, now that those November and December charges are starting to show up in mailboxes in January, the mood is not quite as festive.

Well, gasoline prices starting to rise again doesn’t help either…

The present situation component nearly reversed last month’s gain, falling more than 8 points to 38.4, while the expectations component also declined, from 77.0 in December to 76.2 in January. One-year inflation expectations rose from 5.3 percent to 5.5 percent, in stark contrast to Fed Chief Ben Bernanke’s claim that inflation is too low.