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Source: Reuters
US consumer spending increased slightly faster than expected in January while the US manufacturing sector grew, underscoring views the economic recovery is progressing.
The Commerce Department says spending rose 0.5%, increasing for a fourth straight month, after advancing by an upwardly revised 0.3% in December.
Consumer spending in December was previously reported to have increased 0.2%.
Analysts polled by Reuters had expected consumer spending, which normally accounts for over two-thirds of US economic activity, to increase 0.4% in January.
"The message is continuing progress for the economy, if not as fast as hoped," says Pierre Ellis, a senior economist at Decision Economics in New York.
An industry report says the US manufacturing sector grew in February but at a slower rate than was expected.
Analysts say it is still proof the economy is on the mend.
The Institute for Supply Management (ISM) says its index of national factory activity declined to 56.5 in February from 58.4 in January.
The median forecast of 80 economists surveyed by Reuters was for a reading of 57.5.
A reading below 50 indicates contraction in the manufacturing sector, while a number above 50 means expansion.
The ISM number "is still at the second highest level since late 2005," says Peter Boockvar, equity strategist at Miller Tabak and Co in New York.
"The data provides more evidence that manufacturing continues to lead this economic recovery."
Another report shows US construction spending fell for a third straight month to its lowest level since June 2003 in January.
Consumer spending has been held back by stubbornly high unemployment and analysts worry the economy's recovery from the most painful downturn since the 1930s could stumble in the second half of the year if spending remains lacklustre.
The economy expanded strongly in the second half of 2009, driven by a sharp slowdown in the rate at which business liquidated inventories.
Analysts expect stock rebuilding and continued improvement in business spending to support growth into the first half of 2010.
Consumer spending rose at a modest 1.7% annual rate in the fourth quarter from 2.8% in the prior period.
Spending adjusted for inflation rose 0.3% in January, picking up from a 0.1% gain the prior month.
Personal income edged up 0.1%, a month after increasing 0.3% in December, according to the Commerce Department. That is well below market expectations for a 0.4% increase.
Real disposable income fell 0.6% in January, the largest decline in seven months, after increasing 0.2% the prior month.
The drop in income pulled the savings rate down to an annual rate of $US367.2 billion, the lowest level since February 2009.
The savings rate fell to 3.3%, the lowest since October 2008, from 4.2% in December.
