US consumers flex muscle, easing recession fears

(From Reuters)

U.S. consumer spending regained momentum in January as households ramped up purchases of a variety of goods, in a hopeful sign that economic growth was picking up after slowing to a crawl at the end of 2015.

US shoppers at Target store

US shoppers at Target store

But the outlook for consumer spending was tempered by another report on Friday showing sentiment among households ebbed in early February. Still, the increase in consumer spending last month underscored the economy’s resilience and should ease fears of a looming recession.

“The markets may have decided that the U.S. is headed for recession, but obviously no one told U.S. consumers,” said Paul Ashworth, chief economist at Capital Economics in Toronto.

The Commerce Department said retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 percent last month after an unrevised 0.3 percent decline in December.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Economists had forecast core retail sales increasing 0.3 percent last month.

U.S. stocks were trading higher after the data, while prices of U.S. government debt were lower. The dollar .DXY rose against a basket of currencies.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, moderated in the fourth quarter. That, together with weak export growth due to a strong dollar, efforts by businesses to sell inventory and cuts in capital goods spending by energy firms, restrained GDP growth to a 0.7 percent annual pace. Read more



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