Consumer spending in the U.S. rose in February for a fifth consecutive month, a rebound that may accelerate when employment strengthens.
The 0.3 percent increase in purchases matched the median forecast of economists surveyed by Bloomberg News and followed a 0.4 percent gain in January, Commerce Department figures showed today in Washington. Incomes were unchanged, short of expectations and reflecting the lack of jobs.
Growing demand means retailers such as Best Buy Co. may be able to sustain gains in profits even as Americans face rising foreclosures and a jobless rate that economists anticipate will be slow to retreat from the 26-year high reached last year. Household spending, which accounts for about 70 percent of the economy, may contribute more to the expansion in coming months.
“The consumer is still making traction with the overall recovery,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, who accurately forecast the rise in spending. “Factors are falling into place for the recovery to be sustained.”
Stock-index futures held earlier gains following the report and Treasury securities remained lower. The contract on the Standard & Poor’s 500 Index rose 0.4 percent to 1,167.6 at 8:42 a.m. in New York. The yield on the benchmark 10-year note was 3.87 percent, up from 3.85 late on March 26.
Survey Median
The median estimate of 70 economists surveyed called for a 0.3 percent increase in spending, after an originally reported gain of 0.5 percent the prior month. Projections ranged from no change to a 0.6 percent advance.
The little change in incomes followed a 0.3 percent increase in January. The median estimate of economists surveyed called for a 0.1 percent advance. Wages and salaries were also little changed last month after climbing 0.4 percent in January.
Today’s report showed prices cooled. The inflation gauge tied to spending patterns rose 1.8 percent from February 2009, down from a 2.1 percent increase in the 12 months ended in January.
The Fed’s preferred price measure, which excludes food and fuel, was unchanged in February for a second month and was up 1.3 percent from a year earlier.
Spending Climbs
Adjusted for inflation, spending also climbed 0.3 percent, the best performance since November, following a 0.2 percent rise the prior month.
Because spending rose and incomes were unchanged the savings rate fell to 3.1 percent, the lowest level since October 2008.
Inflation-adjusted spending on durable goods, such as autos, furniture, and other long-lasting items, fell 0.2 percent in February.
Purchases of non-durable goods increased 0.9 percent, and spending on services, which account for almost 60 percent of all outlays, increased 0.3 percent.
The economy grew at a 5.6 percent annual rate in the fourth quarter, the fastest pace in six years, figures from the Commerce Department showed last week. Consumer spending slowed to a 1.6 percent pace from 2.8 percent the previous three months.
Retailer Profits
At the same time, gains in purchases so far this quarter are contributing to stronger sales at some companies, helping to boost profits. Nike Inc., the world’s largest maker of athletic shoes, said this month that third-quarter profit more than doubled, beating analysts’ estimates, as North America posted a sales increase for the first time in a year.
Auto dealers are among retailers that may see a pickup in demand this month, said industry analysts such as J.D. Power & Associates and Edmunds.com. Cars and light trucks will sell at a 12 million unit annual pace in March, up from a 10.4 million pace in February, according to a Bloomberg survey.
Other retailers are already seeing sales improve. Best Buy, the largest U.S. electronics retailer, last week reported fourth-quarter profit that exceeded analysts’ estimates as the Richfield, Minnesota-based company boosted sales by cutting prices on flat-panel TVs and offering discounts during the holidays.
The labor market remains an obstacle and is putting pressure on lawmakers in Washington to implement policies that support job growth. The jobless rate is projected to end the year at 9.5 percent, according to this month’s survey. Unemployment reached 10.1 percent in October, the highest level since 1983.
Payrolls fell by 36,000 workers in February, the Labor Department said this month. Economists anticipate the government’s employment report on Aril 2 will show the economy created 200,000 this month, according to the survey median.
Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=acKi3wD2FnPQ&pos=2
