Consumer spending in the U.S. climbed in February by the most in five months as incomes rose, signaling an improving job market is spurring demand, according to a Bloomberg report.
Household purchases, which account for about 70% of the economy, gained 0.7% after a 0.4% advance the prior month that was bigger than previously estimated, a Commerce Department report showed today in Washington. The median estimate in a Bloomberg survey of 78 economists called for a 0.6% rise. Incomes increased 1.1%, more than projected, sending the saving rate up from a five-year low.
Labor market progress and an increase in household wealth linked to rising home values and stocks are helping Americans cushion the fallout of higher payroll taxes and costlier fuel. Strength in purchases is one reason economists project the economy picked up this quarter after slowing to a 0.4 percent annual rate in the final three months of 2012.
“The economy is in a very good place right now ahead of the fiscal restraint,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “This recovery is sustainable. Consumers are in the driver’s seat.”
Stock markets in the U.S. were closed today for the Good Friday holiday.
Projections for spending ranged from gains of 0.3% to 0.9%. The January reading was previously reported as an increase of 0.2%.