Consumer spending surges in March, boosts growth outlook

WASHINGTON Thu May 1, 2014 8:46am EDT

Store employee Ashley Beal takes an order via a smartphone app to be delivered to the customer by a Google car and courier at a toy and sporting goods shop in Palo Alto, California March 17, 2014. REUTERS/Robert Galbraith

Store employee Ashley Beal takes an order via a smartphone app to be delivered to the customer by a Google car and courier at a toy and sporting goods shop in Palo Alto, California March 17, 2014.

Credit: Reuters/Robert Galbraith

WASHINGTON (Reuters) - U.S. consumer spending recorded its largest increase in more than four and a half years in March, cementing views the economy ended a dismal first-quarter on solid footing.

The Commerce Department said on Thursday that consumer spending increased 0.9 percent after rising by a revised 0.5 percent in February.

March's gain was the biggest since August 2009. Spending was previously reported to have increased 0.3 in February.

Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, rising 0.6 percent in March.

The report added to data ranging from employment to industrial production in suggesting there was momentum in the economy at the tail end of a very difficult first quarter, which provides a springboard for faster growth in the April-June period.

The economy grew at an only 0.1 percent annual rate in the first three months of the year. Economists and Federal Reserve officials, however, pinned the slowdown on the impact of a brutal winter. A moderation in the pace of restocking by businesses, which is likely temporary, also weighed on growth.

In March, consumer spending was buoyed by a 1.4 percent surge in goods purchases. Spending on durable goods rose 2.7 percent, the largest increase since March 2010. Spending on services also increased by a solid 0.7 percent, reflecting increased demand for utilities and healthcare services.

When adjusted for inflation, consumer spending increased 0.7 percent in March after advancing 0.4 percent in February. March's increase in so-called real consumer spending was also the largest since August 2009.

The data was included in the first-quarter gross domestic product report, which was published on Wednesday.

Income increased 0.5 percent in March, the biggest gain since August, after rising 0.4 percent in February.

Income continues to be supported by government subsidies for healthcare payments. Income at the disposal of households after adjusting for inflation and taxes rose 0.3 percent after rising by the same amount in February.

With spending outpacing income growth, the saving rate, which is the percentage of disposable income households are socking away, fell to 3.8 percent in March from 4.2 percent in February. The March saving rate was the smallest since January 2013.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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Comments (3)
“boosts growth outlook?” Trained macroeconomists know (and investors and journalists should) that there is no “growth” on the horizon. To the contrary, the US economy is stuck in a serious stagnation that is slowly getting worse. We have tens of millions of innocent people suffering from unemployment, bankrupticies, foreclosures, and business failures.

Why? Because the governors of the Federal Reserve continue to pursue the policies suggested by Hayek and Keynes for the UK economy as it existed eighty years ago instead of those of John Lindauer and the late George Stigler for the economy of the US as it exists today.

Investors (and journalists) would be well advised to read Lindauer’s recently reissued (by his students) “Macroeconomics” or its less technical everyman’s edition “Inflation, Unemployment, and Government Deficits.” They are in ebook form on Amazon. And if you haven’t read them you shouldn’t be allowed to invest money or write articles about economics or serve as a Federal Reserve policymaker.

May 01, 2014 10:47am EDT  --  Report as abuse
jrj906202 wrote:
I’ve been spending more,lately,but getting a lot of deals,so don’t know if I’m helping retailers much.Sure seems like there is too much product,in stores and online,making it a buyer’s market.I know that’s the case,at Ebay,where I buy and sell.

May 01, 2014 1:01pm EDT  --  Report as abuse
gcf1965 wrote:
So wait, you mean that after the winter weather breaks, and people begin, as they do each year, to spend time in their yards, gardens, and outdoor recreational activities that consumer spending is going up? Color me surprised. Come on, this isn’t a milestone, this is normal and expected. Of course spending increases this time of year, duh!

May 01, 2014 1:40pm EDT  --  Report as abuse
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