Why the rise in household spending?

Shoppers carry their purchases along the Magnificent Mile shopping district in Chicago, Ill.

TEXT OF STORY

KAI RYSSDAL: February made it five months in a row that consumer spending has gone up. We've mentioned, I don't know how many times on the broadcast, that consumers account for almost three quarters of the economy in this country. So spending going up is good -- until you know that incomes are flat.

Marketplace's Sarah Gardner reports.


Sarah Gardner: Patrick Fitzpatrick has loosened up his wallet recently. The 41-year-old dad from Erie, Colo. found a job in February after five months of unemployment, and he's feeling more secure.

Patrick Fitzpatrick: We'll start piano lessons again for my daughter, and we just bought a cell phone for my son. Gone out to dinner a couple times. Just little things.

Economists say Fitzpatrick's like many Americans right now. They're spending slightly more, but not on big-ticket items, like cars or kitchen remodels. And many are paying with cash, not credit. That's reflected in last month's savings rate, which slipped to its lowest level since October 2008.

Still, economist Alan Levenson at T. Rowe Price sees reason for hope.

Alan Levenson: As spending recovers, there's a demand for more goods and services to be produced, which requires more people to produce them. So, it also implies job growth to come.

But analyst Kim Whelan at Wells Fargo says when she dug into the numbers, she discovered nearly half the rise in February household spending came from an increase in things like unemployment benefits and tax refunds.

Kim Whelan: Jobs are coming back slowly, so income will pick up in line with that. But we're not expecting a quick recovery.

And many Americans won't be quick to splurge their way back to that recovery. Fitzpatrick says his family will continue to scour sales and thrift stores to help re-build their savings.

I'm Sarah Gardner for Marketplace.

About the author

Sarah Gardner is a reporter on the Marketplace sustainability desk.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...