March 30, 2013

Spending was up, but much of it went for gas

By JEFFRY BARTASH MarketWatch

WASHINGTON - Consumers lifted spending in February at the fastest rate in five months - a positive sign for the economy -- though a good chunk of their cash went to pay for higher gasoline prices.

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Consumers boosted their personal spending in February, but that good news is a mixed message overall.

The Associated Press

Personal spending climbed a seasonally adjusted 0.7 percent last month, the Commerce Department said Friday. That was a notch higher than the estimate of economists polled by MarketWatch.

The increase in spending in January, what's more, was revised up to 0.4 percent from 0.2 percent in another sign that consumers are still feeling pretty good.

The speedy pace of spending in the first two months of the year indicates that first-quarter growth could snap back sharply to the 3 percent range or more after a lackluster 0.4 percent increase in the final three months of 2012.

"Despite the expiry of the payroll tax cut and higher gasoline prices, we're now likely to see the fastest quarterly gain in real consumption in two years," said Paul Ashworth, chief U.S. economist at Capital Economics.

Yet the composition of spending also suggests some caution is in order. Virtually all of the increase in spending in February, for example, was devoted to perishable items such as gasoline and food.

Purchases of nondurable goods jumped 1.9 percent, likely reflecting the sharp spike in prices at the pump. The average national cost of a gallon of gas surged 13 percent in February, according to the Energy Information Administration.

Spending on durable goods was basically flat in February, marking the worst performance since last October. That's a category that bears watching: Consumers usually cut back on the purchase of big-ticket items if they feel any economic stress or the need to rebuild their savings.

 

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