Consumers spent heavily in February as their incomes increased solidly- more signs that the U.S. economy is gaining strength after a brief recession, The Associated Press reported.
The Commerce Department reported Friday that spending by consumers, which accounts for two-thirds of all economic activity in the United States, increased 0.6% last month after jumping 0.5% in January.
At the same time, Americans’ incomes, which include wages, interest and government benefits, also increased by 0.6%, the largest expansion since October 2000. Incomes rose 0.5% in January.
The data reinforce economists’ view that the recession, which began last March, has ended and probably will turn out to be the country’s mildest downturn eve, the AP reported.
The government reported Thursday that the economy grew by a faster-than the expected 1.7% rate in the final three months of last year. Analysts were amazed by that turnaround because the economy, jolted by the Sept. 11 attacks, shrank at a 1.3% rate in the third quarter.
Consumers increased spending last month on big-ticket items, including cars, by 1.7% after cutting back a revised 0.8% in January.
For nondurable goods, such as food and clothing, consumers spent 0.3% more last month on top of a 1.1% rise in January. Spending on services increased 0.6% in February after a 0.4% jump the month before.
Disposable incomes – income after taxes – increased 0.7% in February after soaring 1.8% in January.
Because disposable incomes increased more quickly than spending in February, the nation’s personal savings rate, which is savings as a percentage of after-tax income, was lifted to 2% from 1.9% in January.