The Commerce Department last week revised real GDP up to 3.1% for the fourth quarter of last year. That was some cause for joy in the stock market. But today we saw a poor consumer-spending report for the month of February, which is picking up the rise in gasoline prices and the decline in consumer sentiment.

Real income after-tax — known as real disposable income — actually fell in February. But the inflation rate jumped 0.4%, which is almost 5% annually. And while real consumer spending did rise, over the past three months it has gained by only 1.4% annually.

The gasoline-driven inflation hike now puts consumer inflation as measured by the personal consumption deflator at 4% over the last three months. That’s higher than wage and salary income. So while energy prices are bulging along with food, real wages look to be falling — not a good combination.

So I repeat my first quarter warning of caveat emptor.

Now, all may not be lost, because manufacturing production looks strong and job creation looks somewhat better. Housing, on the other hand, is still slumping. Some smart economists I know now think Q1 GDP could be less than 2%. But they expect a rebound in the spring and the rest of the year.

Well, maybe so. But a lot depends on gas and food prices and other inflation factors, and that in turn depends on the dollar. If the greenback keeps sinking and producer prices for businesses keep rising, then corporate profits may really disappoint along with the slide in real consumer spending.

How about flat-tax reform and a King Dollar linked to gold?

Mr. Kudlow is a frequent contributor to The New York Sun.