25 January 2022

Consumer Spending Up, But Sentiment Slips

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U.S. consumers increased spending in February as incomes increased for the second straight month. But consumer sentiment slipped a bit in the latest Thomson Reuters/University of Michigan survey. The survey showed consumer sentiment index dipped to 80.0 in March from 81.6 in February. It was little changed from a preliminary reading earlier this month.

The increase in spending offers hope the economy was regaining its footing after being slammed by an unusually cold winter. The Commerce Department report released on Friday took the sting out of a separate report that showed consumer sentiment dipped in March. Economists said they expected household morale to perk up with warmer weather in the spring.

Consumer spending rose 0.3 percent last month after a downwardly revised gain of 0.2 percent in January. A combination of bad weather, an effort by business to work off bloated inventories, the expiration of long-term unemployment benefits and cuts to food stamps is expected to hold back growth to around a 1.5 percent annual pace in the first quarter.

But a rebound is expected as those factors fade. The economy grew at a 2.6 percent rate in the fourth quarter. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was bolstered by a rise in outlays for services, likely because of higher demand for health care and utilities.

Income rose 0.3 percent last month after rising by the same margin in January. It continues to be supported by government transfers for healthcare payments, which offset the drag from the expiration of the long-term unemployment benefits.

The saving rate, which is the percentage of disposable income households are socking away, rose to 4.3 percent from 4.2 percent in January.

Click here for the original article from Reuters. 

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