Ahead of the Bell: US consumer spending

US consumer spending likely slowed in February but expected to rebound in spring

Associated Press
US consumer spending up modest 0.3 percent
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In this March 24, 2014, photo, sale sign is displayed in a shoe store in the Shadyside shopping district of Pittsburgh. The Commerce Department releases personal income and spending for February on Friday, March 28, 2014. (AP Photo/Gene J. Puskar)

WASHINGTON (AP) -- The Commerce Department reports how much consumers spent and earned in February. The report will be released at 8:30 a.m. EDT.

SPENDING SLOWS: The forecast is that spending will slow to a modest gain of 0.2 percent in February, according to a survey by FactSet. It had grown 0.4 percent in January. The expectation is that income grew 0.2 percent last month, down from a January increase of 0.3 percent.

WINTER BILLS: In January, Americans spent more, but the increase came from a surge in spending on heating bills during the harsh winter. Spending in areas such as autos and clothing declined.

The expectation is that the bad weather in February continued to depress consumer spending, which is closely watched because it accounts for 70 percent of economic activity.

But economists expect that spending will rebound in the April-June period, helping to boost overall economic growth to its strongest pace in nearly a decade.

Many analysts foresee the economy growing 3 percent for the year, after a weak first quarter. It would be the most robust annual expansion since 2005, two years before the Great Recession began.

The National Association for Business Economics is predicting that the economy will grow 3.1 percent this year, far higher than the lackluster 1.9 percent gain in 2013.

If that forecast proves accurate, it would make 2014 the strongest year since the economy, as measured by the gross domestic product, expanded 3.4 percent in 2005. Since the Great Recession ended in June 2009, annual growth over the past four years has averaged a weak 2.2 percent.

The U.S. economy has been hit by a series of blows since then from a prolonged European debt crisis which hurt U.S. exports to three years of Washington budget fights, which fueled uncertainty about the government's spending and tax policies.

Tax increases and deep spending cuts that took effect in 2013 subtracted an estimated 1.5 percentage points from growth last year.

With Congress having reached a budget agreement and a deal to raise the government's borrowing limit, companies now have more certainty about federal fiscal policies and because of that, analysts say businesses are likely to boost their hiring and investment spending.

The Labor Department said Thursday that the number of people seeking unemployment benefits last week reached its lowest level since November — an encouraging sign that hiring should be picking up.

In February, U.S. employers added 175,000 jobs, far more than in the two previous months. With more people working, more consumers will have money to spend to boost the economy, analysts believe.

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