EconomicCrisis.US

US consumer spending picked up in January for the fourth month running, lifting hopes that consumers could start adding momentum to an economic recovery that so far has been fuelled by manufacturing.

Personal consumption expenditure rose by 0.5 per cent, commerce department figures showed, exceeding the expectations of Wall Street economists. Separately, the Institute of Supply Management’s latest survey found that the US manufacturing sector expanded in February for the seventh consecutive month.

Incomes also rose during the month, but at a modest 0.1 per cent. When factoring in rising tax payments, disposable personal income actually declined in January. With spending outpacing incomes, the savings rate dropped sharply in January, falling from 4.2 per cent in December to 3.3 per cent.
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Investors have been nervous recently about whether the U.S. Federal Reserve may be sending out clues that interest rate increases are coming.

If they’re hoping to get more clarity from Fed Chairman Ben Bernanke this week, they are likely to be disappointed.

The Fed last week increased the rate charged to banks on emergency loans, which markets took as a sign that tighter credit across the economy may be the next step. Since then, Fed officials have been saying they’re not sure when borrowing costs for consumers and companies could also rise.
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The unemployment rate in the U.S. unexpectedly dropped to 9.7 percent in January, indicating the labor market may be poised to climb out of its deepest slump since World War II.

More than half a million Americans found work, a Labor Department report showed today in Washington, helping push the jobless rate to the lowest since August. A separate survey of employers showed payrolls declined by 20,000 as construction companies and state and local governments cut back.

Manufacturers hired more workers for the first time in three years, expanded hours and boosted pay, which may lift consumer spending and sustain growth. Revisions to previous data increased the number of jobs lost in the recession to 8.4 million, adding impetus to the Obama administration’s push for fresh government measures to boost employment.
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The United States economy grew at its fastest pace in over six years at the end of 2009, but a sluggish job market is still souring economists on the sustainability of the recovery.

Gross domestic product expanded at an annual rate of 5.7 percent in the fourth quarter, well above analysts’ expectations. It had grown at an annualized rate of 2.2 percent in the previous quarter. Analysts had forecast annualized growth of 4.8 percent in the quarter, and the better-than-expected result sent stocks higher when trading opened on Wall Street.
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