Americans made and spent
more money last month, helping the U.S. economy cling to a fifth
straight quarter of growth. Midwest manufacturing expanded in
January, the latest sign that business demand may be picking up.
December’s 0.9 percent gain in personal spending was the
biggest in five months, led by higher auto sales, the Commerce
Department said. The 0.4 percent income gain was the best since
June. A Chicago-area factory index rose to 56, the highest since
May, from 51.7 in December. Readings above 50 indicate expansion.
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“Most households are maintaining spending, and that is
supporting all areas of the economy,” said William Sullivan, a
senior economist at Morgan Stanley, in Jersey City, New Jersey.
“Any revival in manufacturing would be a prelude to more
consistent gains in capital spending, and that is the missing
ingredient for a more robust recovery.”
The U.S. economy slowed to a 0.7 percent annual growth rate
last quarter from 4 percent in the previous three months, and
business spending rose for the first time in two years, the
Commerce Department said yesterday.
Consumers, who have kept the economy growing in the past
year, may rein in spending amid a weak job market and the prospect
of a war with Iraq. U.S. consumer confidence dropped to a three-
month low in January as Americans grew more pessimistic about the
months ahead. The University of Michigan’s sentiment index fell to
82.4 from a revised 86.7 in December. The measure had reached a
nine-year low of 80.6 in October.
“We’re seeing worries about the possible impact of a war
with Iraq creeping into consumers’ psyches,” said Stephen
Stanley, an economist at RBS Greenwich Capital. “Given that
geopolitical worries rather than traditional economic issues may
dominate attitude measures over the next few months, it would be
wise to take the confidence survey results with a grain of salt
and pay attention mainly to the actual spending data.”
Bloomberg News
