American consumers spent modestly last month, a sign that the economic recovery in the U.S. is proceeding at a decent–but not spectacular–pace.
The U.S. Commerce Department reported Monday that consumers boosted their spending by 0.3% in February. That was a tad slower than the 0.4% increase registered in January and marked the smallest increase since September. Still, the increase in spending was considered a respectable showing, especially given the snowstorms that slammed the East Coast and kept some people away from the malls. It marked the fifth straight month that consumer spending rose.
Americans’ incomes, however, didn’t budge.
Incomes were flat in February, following a solid 0.3% gain in January. It marked the weakest showing since July, when incomes actually shrank. Income growth is the fuel for future spending. February’s flat-line reading suggests shoppers will be cautious in the months ahead.
Spending growth in February matched economists’ expectations. The reading on income was a bit weaker than forecast.
Both the spending and income figures in Monday’s report point to a modest economic recovery.
Many analysts predict the economy slowed in the first three months of this year after logging a big growth spurt at the end of 2009.
The American economy will expand at a 2.5% to 3% pace in the first quarter of this year, analysts predict. That’s roughly half the 5.6% pace seen in the final quarter of last year.
In normal times, growth in the 3% range would be considered respectable. But the nation is emerging from the worst recession since the 1930s. Sizzling growth in the 5% range would be needed for an entire year to drive down the unemployment rate in the U.S., now 9.7%, by just one percentage point.
High unemployment, sluggish wage gains, hard-to-get credit and record-high home foreclosures are all expected to prevent consumers from going on a spending spree–one of the main reasons why the pace of the recovery will be more subdued than in the past.
