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Consumers Feeling Better and Spending More

Shoppers showed signs of strength in February spending and March sentiment reports today.

Consumer spent more than expected last month as incomes grew, and although the retailers missed out on much of that spending, there are signs that momentum could be turning in the industry’s favor.

February personal consumption expenditures rose 0.7 percent on top of the 0.4 percent rise in January, according to a Commerce Department report today. The gain in February came in ahead of the 0.6 percent economists projected.

The spending was supported by a 1.1 percent rise in incomes, which fell 3.7 percent in January.

The report showed consumers to be robust enough for IHS Global Insight to boost its first-quarter forecast for real consumer spending growth to 3.3 percent from 2.5 percent.


RELATED STORY: Consumer Confidence Declines in March >>

“Personal spending seems to be chugging along; however, much of the spending is not discretionary,” said Chris Christopher Jr., director of consumer economics at the economic forecasting firm. “A snow storm in the first part of February, rising pump prices, and delayed tax refunds kept many Americans away from the shopping malls and restaurants.”

February sales at apparel and accessories specialty stores increased by a seasonally adjusted 0.2 percent compared with January, while department store sales fell 1 percent.

Christopher said there were several positives on the consumer front.

“Inflation is under control, pump prices have started to decline in March, the housing market is looking brighter, the stock market is strong, and employment is relatively stronger,” he said.

Consumers might be feeling some wind at their backs, despite the still-fragile economy.

The Thomson Reuters/University of Michigan Surveys of Consumers said today that its Index of Consumer Sentiment rose to 78.6 for March, up from 77.6 in February.

“Although confidence dipped in early March, since the middle of the month consumers have expressed improved prospects for economic growth,” said Richard Curtin, chief economist of the Surveys of Consumers. “Two factors were responsible for the gains: consumers discounted the administration’s warning about economic catastrophe following the cuts in federal spending, and consumers have renewed their expectations that job gains will accelerate in the months ahead.”

Consumer optimism has risen several times since the recession only to fall back down, but Curtain said the recent gains could have staying power and “ultimately lead to a lower unemployment rate and support consumer spending increases in the year ahead.”