Greensboro, North Carolina: Consumers are emerging from a two- year hibernation to play a more active role in the US recovery as unemployment recedes, according to economists surveyed by Bloomberg News.
Household purchases probably climbed at a 3 per cent annual pace in the first quarter of the year, the best performance since 2007, according to the median estimate of 57 economists surveyed from April 1 to April 8. Analysts raised spending forecasts through the third quarter, and projected the jobless rate will fall more than anticipated last month.
"The biggest change is that the employment story is looking better," said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts, who was among those raising spending estimates. "The consumer is feeling a little more comfortable and is a little more willing to spend."
Buying power
Auto sales rebounded last month, an early Easter buoyed retailers from Target Corp to Saks Inc, and employers expanded payrolls by the most in three years, pointing to gains in incomes that will sustain buying power. A lack of inflation and concern over unemployment means the Federal Reserve will keep interest rates low through the third quarter, the survey showed. Consumer spending, which accounts for about 70 per cent of the world's largest economy, will grow 2.3 per cent this year, the most since 2007, according to the survey median. Purchases dropped 0.6 per cent in 2009 and 0.2 per cent in 2008, the first back-to-back decline since the 1930s.
Payrolls climbed by 162,000 workers in March, the third gain in the past five months, and the jobless rate held at 9.7 per cent, where it's been since January, the Labor Department reported last week. Unemployment has dropped from a 26-year high of 10.1 per cent in October. "Consumers are beginning to pull their weight," said John Herrmann, senior fixed-income strategist at State Street Global Markets in Boston.
