Sunday, April 20, 2014
Tribune Washington Bureau
Piece by piece, evidence has begun to accumulate that after four years of lackluster performance, the U.S. economy is on track for stronger growth than many people had expected.
The latest support for that view comes from data on consumer spending, which grew at a surprisingly quick pace in February, pushed upward by robust demand for cars and building materials.
The report this week from the Commerce Department came just a few days after employment figures showed faster improvement than most economists had projected, in large part because of the strong rebound of the market for housing. A measure of first-time unemployment claims fell to a five-year low last week.
The Great Recession of 2007-08, the steepest downturn since the 1930s, has been followed by a slow and bumpy recovery. Economists have been divided on whether growth eventually would accelerate.
The more optimistic among them have forecast that the economy would begin to accelerate once consumers and companies worked through the damage left behind by the housing bubble and debt crisis that triggered the recession. That process of "de-leveraging" has now largely run its course, and the new evidence may suggest faster growth in the coming months.
Other economists remained cautious, fearing that reductions in spending by the federal government, which began to take effect this month, will slow the economy and job growth in the spring and summer.
But so far, consumer spending, which accounts for about 70 percent of U.S. economic activity, has proved resilient.
The 1.1 percent jump in retail sales last month from January was the most in five months and double analysts' average expectations. Although higher pump prices for gasoline accounted for a part of that increase, sales also surged at car dealerships, home-improvement stores and Internet retailers.
"The fact that consumer spending hasn't slowed yet is definitely good news," said Ben Herzon, an economist at the forecasting firm Macroeconomic Advisers, one of several forecasting firms that have raised their projections for economic growth this quarter.
Economists pointed to a variety of factors for the robust spending in February, including a possible surge in income tax refunds and larger-than-known support from the underground cash economy, which tends to flourish during hard economic times.
Moreover, pent-up demand, super-low interest rates and some easing of credit by lenders have helped drive up sales of housing and autos, which are important for manufacturing and service businesses.
"Consumers have refinanced, defaulted or restructured mortgage debt and paid down installment debt," said Daniel Meckstroth, chief economist at Manufacturers Alliance for Productivity and Innovation. "Households have the capacity to use more credit, and loans are available for creditworthy households."