Economic cheer in the US as spending increases

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US consumer spending rose in February and income rebounded in further signs that economic activity accelerated in the first quarter.

The Commerce Department said consumer spending rose 0.7 per cent last month after an upwardly revised 0.4 per cent rise in January. Spending had previously been estimated to have increased 0.2 per cent in January.

Economists had expected spending, which accounts for about 70 per cent of US economic activity, to increase 0.6 per cent last month.

After adjusting for inflation, spending was up 0.3 per cent after advancing by the same margin in January. While Americans paid 35 cents more for gasoline last month, they also bought long-lasting goods such as cars and spent more on services, thanks to a bounce-back in income growth.

Income increased a healthy 1.1 per cent after tumbling 3.7 per cent in January.

“Both numbers are consistent with a continued recovery of the United States economy,” said Kathy Lien, managing director at BK Asset Management in New York.

A sustained pace of steady job gains is starting to boost wages, which should help to provide some cushion for households from higher taxes and support economic growth.