Tuesday, March 30, 2010

Spending growth hints at economic 'revival'

WASHINGTON — Confidence is growing that the economic recovery won't 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 Monday that consumers boosted their spending by 0.3 percent in February, marking the fifth straight monthly gain.

Nigel Gault, chief U.S. 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 see no gain

Americans' incomes did not budge, though.

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.

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-3 percent pace in the January-to-March quarter, analysts predict. That is roughly half the 5.6 percent pace seen in the final quarter of last year.

High unemployment, sluggish wage gains, hard-to-get credit and record-high home foreclosures in parts of the nation are all drags on the economy and among reasons that the pace of the recovery could be spotty.

Economists predict that employers added around 190,000 jobs in March, in what they hope will be the start of consistent payroll gains. If they are right, it would mark the biggest jobs gain in three years. The U.S. unemployment rate is expected to stay at 9.7 percent for the third straight month.

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