US con­sumer spend­ing up


House­hold pur­chases, which ac­count for al­most 70 per cent of the econ­omy, climbed 0.3 per cent af­ter a 0.2 per cent gain in Jan­uary that was smaller than pre­vi­ously es­ti­mated, Com­merce Depart­ment fig­ures showed on Sun­day in Wash­ing­ton. The me­dian fore­cast of 79 econ­o­mists in a Bloomberg sur­vey called for a 0.3 per cent gain. In­comes also in­creased 0.3 per cent.

Amer­i­cans were shak­ing off the ef­fects of the cold­est win­ter in four years as they ven­tured out to shop, sup­ported by a job mar­ket that's also pick­ing up speed. Re­tail­ers from Gap to Macy's are among com­pa­nies that are wait­ing on warmer weather to gain clar­ity on the spend­ing out­look.

"The mo­men­tum is shift­ing higher," said Mil­lan Mul­raine, deputy head of US re­search and strat­egy at TD Se­cu­ri­ties USA in New York, who cor­rectly fore­cast the gain in spend­ing. "It's mov­ing in the right di­rec­tion, though we are start­ing from a lower base than other­wise would have been thought."

Projections for spend­ing in the Bloomberg sur­vey ranged from gains of 0.1 per cent to 0.6 per cent. The Jan­uary read­ing was pre­vi­ously re­ported as an in­crease of 0.4 per cent.

The Bloomberg sur­vey me­dian called for in­comes to rise 0.3 per cent.

Fri­day's re­port showed that af­ter ad­just­ing con­sumer spend­ing for in­fla­tion, which gen­er­ates the fig­ures used to cal­cu­late gross do­mes­tic prod­uct, pur­chases in­creased 0.2 per cent, also the best per­for­mance since Novem­ber, af­ter a 0.1 per cent ad­vance the pre­vi­ous month.

Spend­ing on durable goods, in­clud­ing au­to­mo­biles, in­creased 0.1 per cent af­ter ad­just­ing for in­fla­tion fol­low­ing a 0.4 per cent drop in Jan­uary. Pur­chases of non-durable goods, which in­clude gaso­line, gained 0.3 per cent.

House­hold out­lays on ser­vices climbed 0.2 per cent af­ter ad­just­ing for in­fla­tion. In ad­di­tion to health care, the cat­e­gory also in­cludes util­i­ties, tourism, le­gal help and per­sonal care items such as hair­cuts. This makes it typ­i­cally dif­fi­cult for the govern­ment to es­ti­mate ac­cu­rately in the pre­lim­i­nary re­port. Fri­day's data also showed the core price mea­sure, which ex­cludes fuel and food, rose 0.1 per cent in Fe­bru­ary from the prior month and was up 1.1 per cent from a year ago, the same as in Jan­uary.

To­tal prices, which are the ones tracked by Federal Re­serve pol­icy mak­ers, also in­creased 0.1 last month and were up 0.9 per cent from Fe­bru­ary 2013, the small­est year-to-year gain since Oc­to­ber. That re­mains well be­low the cen­tral bank's two per cent goal.

Fed of­fi­cials are mon­i­tor­ing the re­cov­ery as they pur­sue plans to grad­u­ally dial back their bond-buy­ing pro­gram, known as quan­ti­ta­tive eas­ing. The cen­tral bank re­duced its monthly pace of bond pur­chases by $10 bil­lion, to $55 bil­lion, ac­cord­ing to a March 19 state­ment.

"Growth in eco­nomic ac­tiv­ity slowed dur­ing the win­ter months, in part re­flect­ing ad­verse weather con­di­tions," the Fed said in the state­ment. Even so, "there is suf­fi­cient un­der­ly­ing strength in the broader econ­omy to sup­port on­go­ing im­prove­ment in labor­mar­ket con­di­tions."

Pay­rolls climbed by 175,000 in Fe­bru­ary af­ter a 129,000 a month ear­lier, Labour Depart­ment data showed ear­lier this month. The job­less rate rose to 6.7 per cent from 6.6 per cent, a five- year low, as more people en­tered the la­bor force and couldn't find work.

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