US consumer spending up slightly; jobless claims at 45-year low
Shoppers ride escalators at the Beverly Center mall in Los Angeles, California November 8, 2013. REUTERS/David McNew/File Photo
WASHINGTON: U.S. consumer spending rose marginally for a second straight month in February as households boosted savings, the latest indication that the economy lost momentum in the first quarter.But the economy's fundamentals remain strong, with other data on Thursday showing the number of Americans filing for unemployment benefits dropping to more than a 45-year low last week. A tightening labor market is expected to start driving up wages by the second half of this year.The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.2 percent last month after a similar gain in January. It was supported by a rebound in spending on long-lasting goods, such as motor vehicles, as was a rise in financial services and insurance expenditures.The increase in consumer spending in February was in line with economists' expectations.There was also a moderation in monthly inflation readings after prices pushed higher in January. The personal consumption expenditures (PCE) price index excluding the volatile food and energy components rose 0.2 percent last month after advancing 0.3 percent in January.That lifted the year-on-year increase in the so-called core PCE price index to 1.6 percent, the biggest gain since February 2017, from 1.5 percent in January. The core PCE index is the Federal Reserve's preferred inflation measure. It has been below the U.S. central bank's 2 percent target since mid-2012.
Economists believe the annual core PCE price index could accelerate to 1.9 percent in March as last year's weak readings drop out of the calculation. The Fed raised interest rates last week and forecast at least two more rate hikes this year.Prices of U.S. Treasuries and U.S. stock index futures held gains after the data. The dollar was little changed against a basket of currencies.SLOWING GDP GROWTHThe steady rise in inflation last month also helped curb consumer spending. When adjusted for inflation, consumer spending was unchanged in February after falling 0.2 percent in the prior month. That suggests a sharp slowdown in consumer spending in the first quarter after it surged at an eye-popping 4.0 percent annualized rate in the fourth quarter.
The tepid consumer spending added to data on trade, housing and business spending on equipment that have left economists anticipating moderate economic growth in the first quarter.The Atlanta Fed is currently forecasting GDP growth rising at a rate of 1.8 percent in the January-March period. The economy grew at a 2.9 percent pace in the fourth quarter.In February, personal income rose 0.4 percent, matching the increase of the previous two months. Wages increased 0.5 percent last month after climbing 0.6 percent in January.Savings increased to US$497.4 billion in February, the highest level since August 2017, from US$471.3 billion in the prior month. The saving rate rose to a six-month high of 3.4 percent from 3.2 percent in January.Income growth could pick up as the labor market tightens further, which should help to support consumer spending.In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 215,000 for the week ended March 24, the lowest level since January 1973.The labor market is considered to be near or at full employment. The jobless rate is at a 17-year low of 4.1 percent, not too far from the Fed's forecast of 3.8 percent by the end of this year.The claims report also showed the number of people receiving benefits after an initial week of aid increased 35,000 to 1.87 million in the week ended March 17. The four-week moving average of the so-called continuing claims fell 12,750 to 1.86 million.The continuing claims data covered the week of the household survey from which March's unemployment rate will be calculated. The four-week average of continuing claims declined 46,000 between the February and March survey periods, suggesting little change in the jobless rate this month.(Reporting by Lucia Mutikani; Editing by Paul Simao)
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