US consumer spending jumps by more than expected as manufacturing grows

City A.M. Reporter
US consumer spending increased slightly faster than expected in January while the US manufacturing sector grew, adding credence to the view that the economic recovery is in full swing.

The Commerce Department said yesterday that spending rose 0.5 per cent, increasing for a fourth straight month, after advancing by an upwardly-revised 0.3 per cent in December. Consumer spending in December was previously reported to have increased 0.2 per cent.

An industry report said the US manufacturing sector grew in February but at a slower rate than was expected. Analysts said it was still proof the economy is on the mend.

The Institute for Supply Management (ISM) said its index of national factory activity declined to 56.5 in February from 58.4 in January. The consensus forecast was for a reading of 57.5. A reading below 50 indicates contraction in the manufacturing sector, while a number above 50 means expansion.

Another report showed 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.