Jump in consumer spending brightens outlook

Associated Press

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.

Americans spent more even as their income barely grew. To make up the difference, many saved less.

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, 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.