Consumers fuel steady US economy

Associated Press

WASHINGTON

There’s a good reason the U.S. economy is impressing the world right now despite a slowdown in the final three months of 2014: In a word, steadiness.

Companies have been hiring at healthy rates for the past year. Layoffs hover near historic lows. Auto sales are strong. Gas prices have sunk. Congressional budget fights have faded. Americans are increasingly confident.

All that fed a surge of consumer spending last quarter, offsetting weaker business spending caused in part by a pullback by oil drillers and a frail global economy.

The U.S. economy as a whole expanded at a 2.6 percent annual rate, the government said Friday, down from a sizzling 5 percent gain the previous quarter. Yet consumers signaled their optimism by spending at the fastest rate in nearly nine years.

“This hasn’t changed my picture on the strength and resilience of the U.S. economy,” said Scott Anderson, chief economist at the Bank of the West. “Almost all the drivers of consumer spending are pointing in the right direction.”

Nearly six years into the recovery from the Great Recession, the economy has finally gone from straining just to grow to posting consistently solid gains. The gains have come even though many households continue to struggle without much of a financial cushion. Nearly half say they spend all their income, go into debt or use savings to meet their expenses, a new analysis by the Pew Charitable Trusts has found.

In addition, a surging dollar is denting the earnings of U.S. companies that operate overseas. And energy firms have been hurt by plummeting oil prices, and as a result, companies in the Standard & Poor’s 500 index are expected to report weak profit growth.

But collectively, consumers and investors are showing renewed faith in the economy.

On Friday, the University of Michigan said its sentiment index found that U.S. consumers are more confident than they’ve been since 2004.