Surge in consumer spending in April

Income rose 0.5 percent in March after rising 0.4 percent in February

Shoppers at The Mall at Robinson, in Robinson Township, Pa.   (AP Photo/Gene J. Puskar)

Shoppers at The Mall at Robinson, in Robinson Township, Pa.
(AP Photo/Gene J. Puskar)

U.S. consumers ramped up their spending in March at the fastest pace in 4½ years, a sign that the economy is gaining momentum after its winter slowdown.

The Commerce Department said Thursday that consumer spending rose 0.9 percent, the largest monthly gain since April 2009. The department also revised up its estimate of the spending increase in February to 0.5 percent from 0.3 percent.

Consumers spent more on manufactured goods last month. Autos and furniture led much of the gains, according to a separate retail sales report released last month.

Income rose 0.5 percent in March after rising 0.4 percent in February.

Higher spending points to stronger growth ahead because consumer activity accounts for roughly 70 percent of the economy. During last quarter as a whole, harsh winter weather curbed spending, and the economy barely grew at an annual rate of just 0.1 percent.

But Thursday’s report suggested that last quarter’s slowdown was confined mainly to January and February, before consumers stepped up spending in March.

For last quarter overall, consumer spending did grow at a 3 percent annual rate. But that gain was dominated by a 4.4 percent rise in spending on services, reflecting in part higher utility bills during the unusually cold winter.

Economists say warmer weather likely encouraged people to make purchases last month that they had delayed because of snowstorms earlier this year.

“The weather-related rebound may now have run its course,” said Paul Dales, senior U.S. economist at Capital Economics.

Dales projects that consumer spending will increase at a 4.5 percent annual clip this quarter and will help the overall economy grow at a 3.5 percent annual rate over that time.

Employers added 192,000 jobs in March and 197,000 in February, after slight gains in the preceding months. The hiring should help to drive income and spending gains in March.

On Friday, the Labor Department will issue the April employment report. Economists have forecast that 210,000 jobs were added, according to the data firm FactSet.

Payroll processer ADP said Wednesday that private employers added 220,000 jobs in April, the most since November, after adding 209,000 in March.
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One Response to "Surge in consumer spending in April"

  1. woody188  May 5, 2014 at 8:26 am

    Here is the logic fail:

    Higher spending points to stronger growth ahead because consumer activity accounts for roughly 70 percent of the economy.

    This was true in classical national economies but does not hold true in a global economy especially for a state that is a net importer of goods and the largest debtor nation in history. Likewise, if autos led the increase this is actually more debt as few people buy new cars with cash.

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