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Consumer Spending in U.S. Probably Accelerated as the Job Market Improved

Consumer spending in the U.S. probably accelerated in February as the labor market improved, helping to bolster the expansion, economists said before a report today.

Household purchases, which account for about 70 percent of the economy, rose 0.5 percent after a 0.2 percent gain in January, according to the median estimate of 63 economists surveyed by Bloomberg News. Other figures may show the number of contracts signed to buy houses stalled last month.

The U.S. added jobs for the sixth consecutive month in February and the unemployment rate fell to the lowest level since April 2009, generating the income gains needed to cushion Americans from higher food and fuel prices. Spending is contributing more to the recovery, which Federal Reserve policy makers say is on a “firmer footing.”

“Consumer spending is growing at a moderate pace, certainly with help from the labor market,” said Joshua Shapiro, chief U.S. economist at MFR Inc. in New York. “We ought to see decent gains in wages in coming months, which is necessary, given that rising food and energy prices are a headwind. The consumer is an important part of this expansion.”

The Commerce Department’s spending report is due at 8:30 a.m. in Washington. Economists’ forecasts ranged from little change to a gain of 0.8 percent.

The report may also show that incomes grew for a fifth month, rising 0.4 percent last month after increasing 1 percent in January, according to the Bloomberg survey.

Fed on Prices

The Fed’s preferred price index, which is tied to spending patterns and excludes food and fuel, increased 0.9 percent from February 2010, according to the survey. Policy makers aim for long-run overall inflation of 1.6 percent to 2 percent.

“The economic recovery is on a firmer footing,” Fed officials said in a statement after their March 15 meeting. While “the recent increases in the prices of energy and other commodities are currently putting upward pressure on inflation,” these effects are expected to be “transitory,” they said.

At 10 a.m., the National Association of Realtors may report its index of pending home resales was unchanged in February following declines the prior two months, economists in the Bloomberg survey predicted. The data indicate the industry that triggered the recession continues to struggle.

“Until home prices come down enough to clear the market, housing is pretty much going to languish,” Shapiro said.

Jobs, Incomes

Meanwhile, job prospects are improving, and bigger paychecks stemming from a tax compromise reached by President Barack Obama and congressional Republicans in December will help to support demand this year.

Americans continue to shop. Retail sales climbed in February by the most in four months, boosted by a jump in auto purchases. J.C. Penney Co. and Macy’s Inc. (M) were among retailers that topped analysts’ same-store sales estimates, company data showed.

The Standard & Poor’s Supercomposite Retailing Index has risen 0.8 percent this year through March 25, while the broader S&P 500 advanced 4.5 percent.

Orlando, Florida-based Darden Restaurants Inc. (DRI), which owns the Red Lobster and Olive Garden chains, said sales and profit rose in its third quarter ended Feb. 27.

“The economy is in a much better place,” Clarence Otis, Darden’s chief executive officer, said on a March 25 conference call. “That bodes well for an increase in visits to full- service dining.” Still, higher gasoline costs “definitely serve as a tax on consumers,” he said.

More Growth

The economy ended 2010 on a stronger note than previously anticipated. Gross domestic product grew at a 3.1 percent annual rate in the fourth quarter, revised up from a 2.8 percent estimate issued last month, Commerce Department figures showed on March 25. Consumer purchases rose at a 4 percent pace, the most since the same three months in 2006.

Bigger gains in spending made be hard to achieve given rising bills for groceries and gasoline. Regular fuel was at $3.56 a gallon on March 24, the most since October 2008, according to AAA, the nation’s biggest motoring organization. Food costs rose 0.6 percent last month, the most since 2008, consumer-price index data showed.

                        Bloomberg Survey

================================================================
                              Pers     Pers Core PCE  Pending
                               Inc    Spend   Prices    Homes
                              MOM%     MOM%     MOM%     MOM%
================================================================

Date of Release              03/28    03/28    03/28    03/28
Observation Period            Feb.     Feb.     Feb.     Feb.
----------------------------------------------------------------
Median                        0.4%     0.5%     0.2%     0.0%
Average                       0.4%     0.5%     0.2%     0.1%
High Forecast                 0.8%     0.8%     0.2%     3.5%
Low Forecast                 -0.2%     0.0%     0.1%    -3.8%
Number of Participants          57       63       40       29
Previous                      1.0%     0.2%     0.1%    -2.8%
----------------------------------------------------------------
4CAST Ltd.                    0.4%     0.7%     0.2%    -1.0%
ABN Amro Inc.                 ---      0.8%     ---      1.0%
Action Economics              0.4%     0.7%     0.2%     1.8%
Aletti Gestielle              0.0%     0.5%     0.1%     ---
Ameriprise Financial          0.4%     0.5%     0.2%    -3.8%
Banesto                       0.4%     0.5%     ---     -0.7%
Bank of Tokyo- Mitsubishi     0.5%     0.5%     ---      ---
Bantleon Bank AG              0.4%     0.6%     0.2%     ---
Barclays Capital              0.4%     0.7%     0.2%    -1.0%
Bayerische Landesbank         0.4%     0.5%     ---      ---
BMO Capital Markets           0.4%     0.8%     0.2%     1.0%
BNP Paribas                   0.2%     0.7%     ---      ---
Briefing.com                  0.2%     0.3%     0.2%     0.0%
Capital Economics             0.5%     0.5%     0.2%     ---
Citi                          0.3%     0.7%     0.2%     ---
ClearView Economics           0.3%     0.6%     0.1%     1.5%
Commerzbank AG                0.6%     0.7%     0.2%    -2.0%
Credit Agricole CIB           0.3%     0.5%     0.2%     ---
Credit Suisse                 0.8%     0.4%     ---      ---
DekaBank                      0.4%     0.6%     0.2%     1.0%
Desjardins Group              0.5%     0.5%     0.2%     ---
Deutsche Bank Securities      0.5%     0.5%     0.1%     0.0%
Deutsche Postbank AG          ---      0.5%     ---      ---
Exane                         ---      0.5%     ---      ---
First Trust Advisors          0.4%     0.8%     ---      ---
FTN Financial                 0.7%     0.4%     0.1%     ---
Helaba                        0.4%     0.6%     0.2%     ---
HSBC Markets                  0.6%     0.8%     0.2%     ---
Hugh Johnson Advisors         0.5%     0.6%     ---      ---
IDEAglobal                    0.4%     0.6%     0.1%     0.7%
Informa Global Markets        0.3%     0.3%     ---      0.0%
ING Financial Markets         0.4%     0.6%     0.2%     1.2%
Intesa-SanPaulo               0.4%     0.8%     0.2%     ---
J.P. Morgan Chase             0.3%     0.0%     0.2%    -0.3%
Janney Montgomery Scott       0.3%     0.8%     0.2%     1.3%
Jefferies & Co.               0.4%     0.5%     ---      ---
Landesbank Berlin             0.2%     0.5%     ---      ---
Landesbank BW                 0.3%     0.5%     ---      0.0%
Maria Fiorini Ramirez         0.4%     0.5%     0.2%     ---
MET Capital Advisors          ---      0.4%     ---      ---
Moody’s Analytics             0.4%     0.0%     0.2%    -1.0%
Morgan Keegan & Co.           0.4%     0.5%     ---      ---
Natixis                       0.4%     0.5%     0.2%     ---
Newedge                       0.6%     0.4%     ---      ---
Nomura Securities             ---      0.2%     ---      ---
Nord/LB                       0.5%     0.4%     0.2%     ---
OSK Group/DMG                 0.4%     0.7%     0.2%     ---
Parthenon Group               0.5%     0.6%     0.2%    -1.5%
Pierpont Securities           0.3%     0.6%     0.2%     ---
PNC Bank                      0.4%     0.3%     ---      ---
Raiffeisenbank International  0.2%     0.1%     0.2%     ---
RBC Capital Markets           0.3%     0.7%     ---      3.0%
Scotia Capital                0.4%     0.4%     ---     -1.0%
Standard Chartered            0.3%     0.4%     0.2%    -1.0%
State Street Global Markets   0.4%     0.6%     0.2%    -1.9%
Stone & McCarthy Research     0.3%     0.4%     ---      ---
TD Securities                 0.5%     0.7%     0.2%    -1.0%
Union Investment              0.4%     0.4%     ---      ---
University of Maryland        0.3%     0.6%     0.2%     1.0%
Wells Fargo & Co.             0.2%     0.6%     0.2%     ---
WestLB AG                     0.4%     0.5%     0.2%     1.0%
Westpac Banking Co.          -0.2%     0.6%     0.2%     3.5%
Wrightson ICAP                ---      0.5%     0.2%    -0.1%
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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