Tuesday, September 2, 2014
YOLO COUNTY NEWS
99 CENTS

Consumer spending, income jump in February

By
From page A2 | March 29, 2013 |

WASHINGTON (AP) — U.S. consumers stepped up spending in February after their income jumped, aided by a stronger job market that offset some of the drag from higher taxes. The gains led economists to predict stronger economic growth at the start of the year.

Consumer spending rose 0.7 percent in February from January, the Commerce Department said Friday. It was the biggest gain in five months and followed a revised 0.4 percent rise in January, which was double the initial estimate.

Americans were able to spend more because their income rose 1.1 percent last month. That followed huge swings in the previous two months, which reflected a rush to pay bonuses and dividends in December before taxes increased.

After-tax income also increased 1.1 percent last month, allowing consumers to put a little more away. The saving rate increased to 2.6 percent of after-tax income, up from 2.2 percent in January.

The gains in spending and income follow other signs of an economy gathering momentum. Hiring is up, businesses are spending more, the stock market is hitting record levels and the housing recovery is strengthening.

More spending by consumers should boost economic growth in the January-March quarter after a lull at the end of last year. Consumer spending accounts for 70 percent of economic activity.

After seeing Friday’s report on consumer spending, Paul Ashworth, chief U.S. economist at Capital Economics, raised his growth forecast for the first quarter by a full percentage point. Ashworth now expects growth in the January-march quarter increase to an annual rate of 3 percent.

Growth at that pace would be a vast improvement from the 0.4 percent rate in the October-December quarter, which was held back by slower company stockpiling and the sharpest defense cuts in 40 years.

Ashworth called the boost in spending “impressive,” noting that consumers spent more while having to adjust to the higher Social Security taxes and a spike in gasoline prices.

“We’re now likely to see the fastest quarterly gain in real consumption in two years,” he said.

Jennifer Lee, senior economist at BMO Capital Markets, said the increases suggest consumer spending could be growing in the first quarter at an annual rate of more than 3 percent. That would be the fastest gain in more than three years and more than double the 1.3 percent rate in the fourth quarter.

Inflation, as measured by a gauge tied to consumer spending, increased 1.3 percent in February compared with a year ago. That’s well below the Federal Reserve’s 2 percent target, giving the central bank room to keep stimulating the economy without having to worry about price pressures.

Consumers spent more at the start of the year even after paying higher taxes. An increase in Social Security taxes has reduced take-home pay for nearly all Americans receiving a paycheck. And income taxes have risen on the highest earners. The tax increases both took effect on Jan. 1.

One reason the tax increases haven’t slowed the economy is companies have accelerated hiring and are slowly but steadily increasing wages.

Employers have added an average of 200,000 jobs a month since November. That helped lowered the unemployment rate in February to a four-year low of 7.7 percent. Economists expect similar strong job gains in March.

Businesses are also investing more in equipment and machinery, which has given factories a lift after a disappointing 2012.

And the housing recovery that began last year appears to be sustainable. In February, sales of previously occupied homes rose to the highest level in more than three years. The gains have helped lift home prices, which have made Americans feel wealthier.

Stock prices have also surged. On Thursday, the Standard & Poor’s 500 index closed at a record high of 1,569. That surpassed the previous record of 1,565 set in October 2007, a year before the peak of the financial crisis.

Three weeks ago, the Dow Jones industrial average beat its 2007 record.

Markets are closed Friday for the Good Friday holiday.

————

By Martin Crutsinger, AP economics writer

Comments

comments

The Associated Press

.

News

Planning begins for Davis Neighbors’ Night Out

By Enterprise staff | From Page: A1

 
Davis not immune: Are you ready for a big quake?

By Dave Ryan | From Page: A1 | Gallery

 
Learn about RNA at Science Café

By Enterprise staff | From Page: A3

 
Google Glass will be discussed, demonstrated

By Enterprise staff | From Page: A3

Cuddle up at Project Linus’ meeting

By Enterprise staff | From Page: A3

 
Tickets still available for DHS Hall of Fame dinner

By Enterprise staff | From Page: A3

International folk dancing offered Sundays

By Enterprise staff | From Page: A3

 
Public opinion sought about Nishi Gateway

By Lily Holmes | From Page: A3

Rose garden bricks to be dedicated Saturday

By Enterprise staff | From Page: A3

 
Got bikes? Donate ‘em!

By Enterprise staff | From Page: A3

It’s About Time plays Davis Farmers Market’s Picnic in the Park

By Anthony Siino | From Page: A3 | Gallery

 
Register year-round at Davis Chinese School

By Enterprise staff | From Page: A8

 
.

Forum

Tom Meyer cartoon

By Debbie Davis | From Page: A4

 
Have the facts before you judge

By Special to The Enterprise | From Page: A4

Tesla has state walking a tightrope

By Tom Elias | From Page: A4

 
Special-needs passengers ignored

By Letters to the Editor | From Page: A4

A cure for Davis’ problems

By Letters to the Editor | From Page: A4

 
A good use for the MRAP

By Letters to the Editor | From Page: A4

Marriage vs. male instinct

By Creators Syndicate | From Page: B5

 
.

Sports

Life without MacDonald starts Friday for DHS

By Thomas Oide | From Page: B1 | Gallery

 
Clark recalls his hole-in-one — the first at Davis Golf Course

By Bruce Gallaudet | From Page: B1 | Gallery

 
Fruits of their Labor Day

By Sue Cockrell | From Page: B1 | Gallery

DHS boys looking to replicate a big cross country performance

By Spencer Ault | From Page: B1 | Gallery

 
UCD roundup: Aggies edge Quinnipiac in overtime

By Enterprise staff | From Page: B2

Baseball roundup: Aces end River Cats’ season

By Staff and wire reports | From Page: B3

 
Sports briefs: Hot Shots basketball tryouts coming up

By Enterprise staff | From Page: B3

Junior Blue Devils strong in home debut, winning 3 on the field

By Enterprise staff | From Page: B8 | Gallery

 
.

Features

.

Arts

.

Business

.

Obituaries

Elaine Dracia Greenberg

By Special to The Enterprise | From Page: A5

 
.

Comics

Comics: Tuesday, September 2, 2014 (set 1)

By Creator | From Page: B5

 
Comics: Tuesday, September 2, 2014 (set 2)

By Creator | From Page: B7