Consumer spending is keeping confidence in economy growing
Feb. gain marks 5th month in row
WASHINGTON — Confidence is growing that the economic recovery will not fizzle out. Consumers kept cash registers humming last month at a decent pace, pointing to modest and steady economic gains ahead.
The Commerce Department reported yesterday that consumers boosted their spending by 0.3 percent in February, marking the fifth straight monthly gain.
Nigel Gault, chief US economist at IHS Global Insight, called it “an encouraging sign of consumer revival.’’
The pickup in spending was a tad slower than the 0.4 percent increase registered in January and marked the smallest increase since September. Nonetheless, the spending gain was considered decent, especially given the snowstorms that slammed the East Coast and kept some people away from the malls.
“Households are starting to ease up on their tight grip on their wallets, though it would be nice if they had more money to spend,’’ observed Joel Naroff, president of Naroff Economic Advisors.
Incomes were stagnant in February, as the bad weather forced employers to trim workers’ hours. That followed a solid 0.3 percent gain in January and marked the weakest showing since July, when incomes actually shrank. Income growth is the fuel for future spending. February’s flat-line reading suggests shoppers will be cautious in coming months.
Spending growth in February matched economists’ expectations. The reading on income was a bit weaker than forecast.
Many analysts predict the economy slowed in the first three months of this year after logging a big growth spurt at the end of 2009.
The economy will expand at a 2.5 percent to 3 percent pace in the January-to-March quarter, analysts predict. That’s roughly half the 5.6 percent pace seen in the final quarter of last year.
In normal times, growth in the 3 percent range would be considered respectable. But the nation is emerging from the worst recession since the 1930s. Sizzling growth in the 5 percent range would be needed for an entire year to drive down the unemployment rate, now 9.7 percent, by just 1 percentage point.
High unemployment, sluggish wage gains, hard-to-get credit and record-high home foreclosures are all expected to deter consumers from going on a spending spree — one of the main reasons why the pace of the recovery will be more subdued than in the past.