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May 01. 2014 8:22PM

Solid U.S. consumer spending buoys growth outlook

WASHINGTON — U.S. consumer spending recorded its largest increase in more than 4 1/2 years in March, cementing views the economy ended a dismal first-quarter on solid footing.

The growth picture also was brightened by data on Thursday showing factory activity accelerated for a third straight month in April.

The Commerce Department said consumer spending increased 0.9 percent after rising by 0.5 percent in February. March’s gain was the biggest since August 2009 and beat economists’ expectations for a 0.6 percent rise.

Consumer spending accounts for more than two-thirds of U.S. economic activity.

In a separate report, the Institute for Supply Management said its index of national factory activity rose to 54.9 last month, up from 53.7 in March. It was the best reading since December and reflected a pick-up in manufacturing jobs. New orders, however, were unchanged.

The upbeat reports added to data such as employment and industrial production in suggesting there was momentum in the economy at the tail end of a difficult first quarter, providing a springboard for faster growth in the April-June period.

“It reinforces our expectation for a 3.5 percent or better second-quarter growth performance,” said Millan Mulraine, deputy chief economist at TD Securities in New York.

The economy grew at an annual rate of only 0.1 percent in the first three months of the year. Economists and Federal Reserve officials, however, pinned the slowdown on the impact of a brutal winter. A moderation in the pace of restocking by businesses, which is likely temporary, also weighed on growth.

While another report from the Labor Department showed an unexpected rise in the number of Americans filing for unemployment benefits last week, the overall trend in initial claims continued to point to improving labor market conditions.

The government is expected to report on Friday that nonfarm payrolls increased by 210,000 last month after rising by 192,000 in March, according to a Reuters survey of economists.

The unemployment rate is forecast falling one-tenth of a percentage point to 6.6 percent.


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