- The Washington Times - Tuesday, March 30, 2010

Confidence is growing that the economic recovery won’t fizzle out. Consumers kept cash registers humming last month at a decent pace, pointing to modest and steady economic gains ahead, according to new government figures.

The Commerce Department reported Monday that consumers boosted their spending by 0.3 percent in February — the fifth straight monthly gain.

Nigel Gault, chief U.S. economist at IHS Global Insight, called it “an encouraging sign of consumer revival.”

The pickup in spending was a tad slower than the 0.4 percent increase registered in January and marked the smallest increase since September. Nonetheless, the spending gain was considered decent, especially given the snowstorms that slammed the East Coast and kept some people away from the malls.

“Households are starting to ease up on their tight grip on their wallets, though it would be nice if they had more money to spend,” said Joel Naroff, president of Naroff Economic Advisors.

But incomes were stagnant in February, as the bad weather forced employers to trim workers’ hours. That followed a solid 0.3 percent gain in January and marked the weakest showing since July, when incomes actually shrank.

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.

Analysts predict that the economy will expand at a 2.5 percent to 3 percent pace in the January-to-March quarter. That’s roughly half the 5.6 percent pace seen in the final quarter of last year.

In normal times, growth in the 3 percent range is considered respectable. But the nation is emerging from the worst recession since the 1930s. Sizzling growth in the 5 percent range would be needed for an entire year to drive down the unemployment rate, now 9.7 percent, by just one percentage point.

Unlike past recoveries, where consumer spending led the way, this one is hinging more on the spending of businesses and foreigners.

High unemployment, sluggish wage gains, scarce credit and record-high home foreclosures are all expected to deter 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.

With spending outpacing income growth, Americans’ savings dipped in February.

Americans saved 3.1 percent of their disposable income, down from 3.4 percent in January. It was the lowest reading on the savings rate since October 2008 and suggested that people have more of an appetite to spend.

Consumers increased their spending on “nondurable” goods, such as food and clothing, by 0.7 percent in February. That was down from a 1.7 percent increase in January. They boosted spending on services by 0.3 percent, up from a 0.2 percent rise in January. But they cut spending on “durable” goods, such as cars and appliances, by 0.4 percent, not as deep as the 1.4 percent reduction in January.

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