Economy in U.S. Probably Expanded as Consumer Spending Picked Up
The biggest increase in consumer
spending in a year probably helped extend the U.S. economic
expansion into the first quarter, economists said before a
report today.
Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2.5 percent annual rate after a 3 percent gain the prior three months, according to the median forecast of 85 economists surveyed by Bloomberg News. Household purchases, which account for about 70 percent of the economy, advanced by the most since the end of 2010, the survey showed.
Job creation and income gains were enough to propel sales at car dealerships and retailers like Target Corp. (TGT), helping make the U.S. more resilient to weakness in overseas markets. Federal Reserve officials this week said they expect growth to stay “moderate,” helping explain why they adhered to a goal of keeping borrowing costs low through 2014.
“We’re shifting gears right now toward more domestic demand-driven growth,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “Consumer spending is growing and businesses are investing. As long as interest rates stay low, it should lead to a self- reinforcing economic feedback loop.”
The Commerce Department will release the first estimate of GDP at 8:30 a.m. in Washington. Economists’ estimates ranged from 1.2 percent to 3.6 percent.
Stocks advanced along with the economy in the first quarter. The Standard & Poor’s 500 Index climbed 12 percent, including a 3.1 percent gain in March. That marked the strongest three-month start to a year since a 13.5 percent advance in the first quarter of 1998. Earnings have beaten analysts’ estimates at about 75 percent of the companies in the S&P 500 that released results since April 10, according to data compiled by Bloomberg.
Jobs and the economy are a central theme in political sparring between President Barack Obama and Republican challenger Mitt Romney. Obama’s job approval rating reached 50 percent in a Gallup Daily tracking poll for April 21-23. The telephone survey of 1,534 adults has a margin of error of plus or minus 3 percentage points. The 50 percent approval mark is notable because all incumbent presidents since Dwight Eisenhower at or above the level at the time of the election were re- elected, according to Gallup.
The U.S. is outperforming some of the other major economies across the globe. The U.K. economy slipped into its first double-dip recession since the 1970s, figures from London showed this week. In Japan and Germany, gross domestic product dropped in final three months of 2011 at 0.7 percent annual rates.
Small businesses such as Spreadshirt Inc. are also benefiting from the pickup in consumption. The print-on-demand t-shirt company had a 108 percent increase in sales in the first quarter from a year ago. The company, which is based in Leipzig, Germany, is opening a factory in Las Vegas and will add 90 employees to its current U.S. staff of 150 as more of its customers buy shirts, according to Vice President Mark Venezia.
Sales have been “remarkable,” Venezia said. “With this growth we’re looking at expansion into other countries. We’re investing in more equipment.”
Employment and the accompanying income gains may have alleviated some of the strain from higher fuel prices. The cost of a gallon of gasoline at the pump jumped 65 cents from the beginning of the year to $3.93 on March 31, which was the highest level in 10 months, according to AAA, the largest U.S. auto group.
Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2.5 percent annual rate after a 3 percent gain the prior three months, according to the median forecast of 85 economists surveyed by Bloomberg News. Household purchases, which account for about 70 percent of the economy, advanced by the most since the end of 2010, the survey showed.
Job creation and income gains were enough to propel sales at car dealerships and retailers like Target Corp. (TGT), helping make the U.S. more resilient to weakness in overseas markets. Federal Reserve officials this week said they expect growth to stay “moderate,” helping explain why they adhered to a goal of keeping borrowing costs low through 2014.
“We’re shifting gears right now toward more domestic demand-driven growth,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “Consumer spending is growing and businesses are investing. As long as interest rates stay low, it should lead to a self- reinforcing economic feedback loop.”
The Commerce Department will release the first estimate of GDP at 8:30 a.m. in Washington. Economists’ estimates ranged from 1.2 percent to 3.6 percent.
Consumer Sentiment
A separate report at 9:55 a.m. may show the Thomson Reuters/University of Michigan final index of consumer sentiment cooled this month from a one-year high in March, economists in the Bloomberg survey predicted.Stocks advanced along with the economy in the first quarter. The Standard & Poor’s 500 Index climbed 12 percent, including a 3.1 percent gain in March. That marked the strongest three-month start to a year since a 13.5 percent advance in the first quarter of 1998. Earnings have beaten analysts’ estimates at about 75 percent of the companies in the S&P 500 that released results since April 10, according to data compiled by Bloomberg.
Jobs and the economy are a central theme in political sparring between President Barack Obama and Republican challenger Mitt Romney. Obama’s job approval rating reached 50 percent in a Gallup Daily tracking poll for April 21-23. The telephone survey of 1,534 adults has a margin of error of plus or minus 3 percentage points. The 50 percent approval mark is notable because all incumbent presidents since Dwight Eisenhower at or above the level at the time of the election were re- elected, according to Gallup.
The U.S. is outperforming some of the other major economies across the globe. The U.K. economy slipped into its first double-dip recession since the 1970s, figures from London showed this week. In Japan and Germany, gross domestic product dropped in final three months of 2011 at 0.7 percent annual rates.
Faster Spending
Today’s Commerce Department data may also show a 2.3 percent increase in first-quarter household consumption, following a 2.1 percent gain in the prior period, according to the Bloomberg survey median.Small businesses such as Spreadshirt Inc. are also benefiting from the pickup in consumption. The print-on-demand t-shirt company had a 108 percent increase in sales in the first quarter from a year ago. The company, which is based in Leipzig, Germany, is opening a factory in Las Vegas and will add 90 employees to its current U.S. staff of 150 as more of its customers buy shirts, according to Vice President Mark Venezia.
Sales have been “remarkable,” Venezia said. “With this growth we’re looking at expansion into other countries. We’re investing in more equipment.”
Labor Market
A job market that’s improved since the end of 2011 is underpinning demand. Employers increased payrolls by 635,000 from January through March, the biggest quarterly gain since the first three months of 2006, data from the Labor Department show. At the same time, the jobless rate has been above 8 percent for the past three years.Employment and the accompanying income gains may have alleviated some of the strain from higher fuel prices. The cost of a gallon of gasoline at the pump jumped 65 cents from the beginning of the year to $3.93 on March 31, which was the highest level in 10 months, according to AAA, the largest U.S. auto group.
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