WASHINGTON (AP) — Americans spent slightly more in
February but the gain still left consumer spending growing at a modest
pace, held back by severe winter weather.
Consumer spending rose
0.3 percent in February following a 0.2 percent rise in January, the
Commerce Department reported Friday. The spending increases would have
been even weaker except for a surge in spending on utility bills. In
February, spending on durable goods such as autos actually dropped as
consumers stayed away from auto dealerships. Service spending, which
covers utility payments, rose.
Analysts say consumer spending,
which accounts for 70 percent of economic activity, slowed significantly
in the current quarter and will depress overall economic growth. But
they are looking for a rebound in the second quarter.
The report showed that after-tax income was up 0.3 percent in February, the same as in January.
The saving rate edged up slightly to 4.3 percent of after-tax income compared to January, when the saving
rate was 4.2 percent.
The
report showed that inflation remains very low. An inflation gauge tied
to consumer spending was up just 0.9 percent in February compared to a
year ago, significantly below the 2 percent target set by the Federal
Reserve.
The Fed last week approved another reduction in its
monthly bond buying, which the central bank is doing to lower long-term
interest rates and boost economic growth. But some economists are
concerned that if the Fed removes its support too quickly, it could
undermine efforts to get prices rising closer to the target.
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 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.
Copyright 2014 The Associated Press. All rights
reserved. This material may not be published, broadcast, rewritten or
redistributed.