Even as the savings rate in the U.S. continues at near 14-year highs, consumer spending is on the rise. Indeed, with inflation creeping back into the U.S. economy, it is no surprise that consumer spending is increasing. But it might be a little early to proclaim the U.S. economy on the road to recovery. The economy still has to overcome the contraction experienced in the last part of 2008, and struggle through this first quarter of 2009.
Indeed, even if consumer spending does increase, it will still have a ways to compensate for spending decreases at the end of last year. The Financial Times reports on U.S. consumer spending trends:
Economists expect that consumer spending could increase by an annual rate of 1 per cent in the first quarter of this year after falling by 4 per cent during the second half of last year.
Another hurdle to U.S. consumer spending is likely to be the fact that personal income fell in February. Personal incomes are on the decline — thanks to job loss and pay freezes.
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