Consumer Spending Revs Up in February

U.S. consumer spending rose in February at the fastest pace since a car-sales-led surge in October, as the economy sailed ahead at full tilt in the early stages of its emergence from recession.

Spending grew 0.6% last month after a 0.5% gain in January, the Commerce Department reported.

The gain was led by purchases of big-ticket items such as cars and furniture and outpaced the 0.5% rise projected by private economists.

“It looks as if the economy is in a fairly healthy state of recovery,” said Bill Cheney, chief economist at John Hancock Financial Services in Boston. “These numbers are a lot better than one would have been expecting a month or two ago.”

February’s spending increase was the sharpest since a 3% buying jump in October, which occurred as consumers flocked to car showrooms to take advantage of no-interest financing deals.

Growth in Americans’ incomes appeared to encourage the enthusiasm for shopping. Personal income-- which includes wages, salaries and money from other sources such as rents and interest on bank deposits--climbed 0.6% in February after a 0.5% rise in the prior month.

The income rise last month was the biggest since December 2000 and was double the 0.3% increase expected by U.S. economists in a Reuters survey.

Taken together, the income and spending figures added to growing evidence of a surprisingly strong momentum in the U.S. economy as it pulls out of a mild recession that began last March.

Consumer spending remained resilient throughout the slump and--as evidenced by Friday’s report as well as consumer confidence numbers that have rolled out this month--is showing no sign of tailing off just yet.

A closely watched gauge of consumer sentiment by the University of Michigan bolted higher in March to 95.7, the highest reading since December 2000.

Spending in February was especially strong in the key category of durable goods, such as cars, furniture and appliances.

Durable goods spending jumped 1.7% in February, rebounding from a 0.8% drop in January. Purchases of nondurable goods rose 0.3% in the latest month, while service expenditures grew 0.6%.

Because consumer purchases drive two-thirds of U.S. economic activity, the spending number bodes well for gross domestic product in the first quarter, which ends Sunday.

On Thursday, the Commerce Department ratcheted up its estimate of gross domestic product for the fourth quarter of last year, revising the pace of growth to 1.7% from a previously reported 1.4%, cementing beliefs the economy had entered 2002 already in recovery and on sure footing.