According to The Commerce Department, the U.S consumer spending, which accounts for two-thirds of U.S. economic activity, went up for a second straight month in February as households boosted savings. Even though the momentum was indicated to be weaker, other economy’s fundamentals were still strong. Especially the number of American’s unemployment benefits filed dropped to more than a 45-year low last week.
The consumer spending rose 0.2 percent last month with a similar gain in January. It was supported by a rebound in spending on long-lasting goods, such as motor vehicles, as was a rise in financial services and insurance expenditures. According to the report from Reuters, the increase in consumer spending in February was in line with economists’ expectations.
In February, personal income rose 0.4 percent, wages increased 0.5 percent, and savings increased to $497.4 billion in February, the highest level since August 2017, from $471.3 billion in the prior month. The saving rate also rose to a six-month high of 3.4 percent from 3.2 percent in January.
The Labor Department also reported that initial claims for state unemployment benefits dropped 12,000 to a seasonally adjusted 215,000 for the week ended March 24, the lowest level since January 1973. The labor market is currently considered to be near or at full employment. The jobless rate is at a 17-year low of 4.1 percent, not too far from the Fed's forecast of 3.8 percent by the end of this year.
Additionally, the U.S. GDP growth is slowing down. The Atlanta Fed forecasted GDP growth would be rising at 1.8 percent in the January-March period. Reportedly, the economy grew at a 2.9 percent pace in the fourth quarter.