Shoppers stroll along Condotti street during the Christmas season in downtown Rome December 21, 2009.
Credit: Reuters/Alessia PierdomenicoBy Lucia MutikaniWASHINGTON | Thu Apr 29, 2010 2: 57 pm EDT
WASHINGTON (Reuters)-us consumers increased spending for a ninth straight month in March, as they are stretched to cover the higher costs for food and gasoline, posting the highest inflation rate year on year gain 10 months.
Despite the rising cost of living, Americans grew more optimistic about the economy this month and still call that inflation expectations in the medium-to-long term, another report showed Friday.
Consumers seem to overcome the high cost, but could test if petrol prices shoot up from $ 4 gallon. The national price for regular unleaded gasoline rose 3.5 cents to $ 3.88 per week through Monday.
"My prediction is that we are not going to see further increases in energy prices, as they pass through the year. Consumers will continue to contribute to development, albeit in a supporting role, "said economist Richard DeKaser, Parthenon Group in Boston.
Consumer spending drives 70 percent of the economy, rose 0.6 percent last month after promotion 0.9% in February, the Commerce Department said. But prices rose 0.4 percent a cumbersome month to month, leaving only 0.2 percent of expenditure after adjustment for inflation.
While commodity prices have been deprived of consumer purchasing power, which will take over the second quarter with a somewhat optimistic outlook.
Thomson Reuters/University of Michigan consumer sentiment index rose to 69.8 from 67.5 in March. The research of one-year inflation expectation was unchanged at 4.6 percent, but the prospects for inflation of five-to-10-year slipped 2.9 percent from 3.2% in March.
THESEIS WORK AT ELEVATOR EXPENSES
Improving confidence and strengthen labour market should support costs, even if to gasoline prices remain elevated, say the economists.
"Looking for consumption to continue to grow in the second quarter, is likely to see growth (expenditure) quite similar to what we saw during the first quarter," said Daniel Silver, an economist at JPMorgan in New York.
Consumer spending growth slowed to an annual rate of 2.7 percent in the first quarter after growth of 4 percent in the final three months of 2010, the Government said Thursday.
That the profit, which took account of the expenditure that was released Friday, was a factor behind a slowdown in global economic growth at a rate of 1.8 percent at the beginning of this year from the expansion rate of 3.1% in the last quarter of 2010.
PARASKEYIS PSYXIS?
A third report showed factory activity in the country's Midwest slowed this month, although it remained at a strong level and data did little to Shake economists convictions that growth will pick up the current quarter.
Economists said the tepid demand during the first quarter had left companies with less than you need to rebuild inventories.
"Significantly Reduced the need for new orders and production of beef up inventories and consequently, we find that the factory sector slowed down somewhat," said DeKaser.
"Friday come from a sprint earlier this year and still moves forward at a healthy clip."
The mixed economic reports had little impact on financial markets in the United States. Strong earnings from Caterpillar Inc., the world's largest manufacturer of heavy-equipment and oil company Chevron Corp., enters the Dow Jones industrial average in line for the best performance of monthly since December.
The dollar fell to a three-year low against a basket of currencies in the direction of the Fed's monetary policy remains accommodative. Prices of u.s. government debt increased.
Caterpillar CEO Doug Oberhelman said he was positive about the short-term Outlook for the US economy, but that budget cuts were needed in Washington to establish a foundation for the development of ichisews.
"Instead of" pointing fingers at the other, the Administration (Obama) and members of Congress need to work hand in hand to find solutions that will position US for long-term economy of force, said Oberhelman.
ANODOS SUBDUED WAGE
The spending report showed consumer prices 1.8 percent from a year ago--the largest 12-month gain since May.
An index of core values, movies, food and energy costs rose just 0.1 percent from February, while keeping the profit in year to 0.9 percent, just a touch over everything at a low level of 0,7% in December.
Fed officials, who see the measure closely core to measure underlying price trends, have said that they expect noble food and the cost of energy to ignite a widespread inflation.
Income rose 0.5 percent last month after a gain of 0.4% in February, but wages and salaries advanced only by 0.3 percent. With unemployment at 8.8% in March, moderate wage increases will help to keep a lid on prices.
A separate report from the Labor Department showed wages rose to enthusiastic percentage of 0.4% in the first quarter, and was only 1.6 percent from a year ago.
(Edited by Andrea Ricci and Ken Barry)
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