Consumer Spending in the U.S. Probably Rose for Second Month
U.S. consumer spending probably rose in February for a second month, a sign the biggest part of the economy may be steadying, economists said ahead of a government report today.
Purchases increased 0.2 percent after rising 0.6 percent in January, according to the median forecast of 68 economists in a Bloomberg News survey. Another report may show Americans are still pessimistic about the economic outlook.
Gains in consumer spending, which accounts for about 70 percent of the economy, are underpinning forecasts for a rebound in growth later this year, just when policy initiatives from the Obama administration and Federal Reserve are also likely to kick in. Still, any pickup may be constrained by mounting job losses that hurt Americans’ confidence and paychecks.
“The consumer is stabilizing after a really deep pullback,” said Stephen Gallagher, chief U.S. economist at Societe Generale in New York. “We’re pretty far from a strong recovery, but the sharp declines are over. That’s the first step.”
The Commerce Department’s spending report is due at 8:30 a.m. in Washington. Survey estimates ranged from a decline of 0.5 percent to a 0.5 percent gain. Incomes probably fell 0.1 percent, the survey showed.
At 10 a.m., figures from Reuters/University of Michigan may show its consumer sentiment index rose to 56.8 this month from 56.3 in February, according to the survey median. The gauge sank to 55.3 in November, the lowest level since 1980.
Fourth-Quarter Slump
The economy shrank in the fourth quarter at a 6 paydayloans.3 percent annual pace, the worst performance since 1982, in what may be the depths of the recession. Consumer spending fell at a 4.3 percent rate, marking the first back-to-back declines in excess of 3 percent since records began in 1947.
Purchases are doing better so far this year. Sales at retailers dropped less than forecast in February and January’s 1.8 percent gain was the biggest in three years, according to government figures.
“There are just a lot of deals and incentives being thrown at consumers,” Societe Generale’s Gallagher said. The price of gasoline at less than $2 a gallon in January and February leaves cash for other purchases, some tax cuts are starting to work, and plunging mortgage rates have spurred refinancing, which “puts more money to work,” he said.
Best Buy Co., the largest U.S. electronics retailer, yesterday reported profit that fell less than analysts forecast for the quarter ended Feb. 28.
Ended ‘Stronger’
“We prepared for reduced consumer spending, and we were pleased when the quarter finished stronger than it began,” Chief Executive Officer Brad Anderson said in a statement.
Carmakers General Motors Corp. and Chrysler LLC are still counting on government aid for survival. U.S. auto sales in February slid to the lowest rate since December 1981, led by a 53 percent plunge for Detroit-based GM.