Consumer spending up for second straight month
After half a year of declines, consumer spending edged up for a second consecutive month in February even though incomes sagged under the weight of further job losses.
The spending increases were seen as a hopeful sign that this key sector of the economy is staging a modest rebound that could help pull the country out of the recession.
Consumer spending rose by 0.2% last month after an even bigger 1% jump in January, which was the largest one-month gain in 3 1/2 years, the Commerce Department reported Friday. Those gains followed a record six straight monthly declines as consumers tightened their belts in the face of a deepening recession.
Americans’ incomes slipped further in February, dropping 0.2%, the fourth drop in the last five months, as wages and salaries continued to be battered by the massive layoffs that have occurred as the recession, already the longest in a quarter-century, has deepened.
Consumer belt-tightening has caused the personal savings rate, which was hovering near zero a year ago, to jump sharply. It stood at 4.2% in February after being at 4.4% in January. That was the first time in more than a decade that the savings rate has been above 4% for two straight months.
A separate report Friday showed that the Reuters-University of Michigan survey of consumer confidence rose to 57.3 in March, still near a three-decade low but higher than the February reading of 56.3.
Economists said the slight rise in consumer confidence and the back-to-back increases in consumer spending after a string of declines provided some reason to hope that at the very least the steep slide in the economy could be ending.
“The fact that consumers have stopped retrenching is the most hopeful sign for the economy in a long time,” said Mark Zandi, chief economist at Moody’s Economy.com.
Consumer spending is closely followed because it accounts for about 70% of total economic activity. Spending fell at a rate of 3.8% in the July-September quarter and then by a 4.3% rate in the fourth quarter.
