WASHINGTON — U.S. consumers boosted their spending in February by the most in seven months, raising expectations for stronger growth at the start of the year.

Consumer spending rose 0.8 percent last month, the Commerce Department said Friday. The biggest increase since July coincided with the best three-month hiring stretch in two years.

The jump in consumer spending helped Wall Street close out its best first quarter since 1998. More spending also led economists to upwardly revise their economic growth estimates for the January-March quarter.

Paul Dales, an economist at Capital Economics, said he now expects annual growth for the first quarter to be around 2.5 percent, compared with earlier estimates of about 2 percent. Consumer spending drives roughly 70 percent of economic activity.

Some of the higher spending last month reflected surging gas prices. But consumers spent more on other goods and services, too. After excluding inflation, which was due mainly to gas prices, spending rose a solid 0.5 percent.

Many Americans are spending more freely after the economy added an average of 245,000 jobs a month from December through February. That’s lowered the unemployment rate to 8.3 percent, the lowest in three years. Most economists expect similar job growth in March.

Still, the hiring gains have not resulted in bigger paychecks for most people. Income grew just 0.2 percent last month, matching January’s weak increase. And when taking inflation into account, income after taxes fell for a second straight month. The saving rate dropped to 3.7 percent of after-tax income in February.

 


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