US consumer spending likely grew at faster rate in March after weak February

Economic IndicatorsAssociated Press

The Commerce Department releases its March report on consumer spending, which accounts for 70 percent of economic activity. The report will be issued Thursday at 8:30 a.m. Eastern.

SPENDING GROWTH: The expectation is that consumer spending rose 0.5 percent in March, according to a survey of private economists by data firm FactSet. The economists expected income to grow by 0.3 percent in March.

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SPENDING RECOVERY: In February, U.S. consumers increased spending by a slight 0.1 percent while they saw their income grow 0.4 percent.

Economists are looking for consumer spending to accelerate in coming months after a slowdown in the first quarter that reflected in part harsh winter weather which kept shoppers away from the malls and auto dealerships.

The government reported Wednesday that the overall economy, as measured by the gross domestic product, slowed sharply in the first three months of the year with GDP growth of just 0.2 percent, down from a 2.2 percent growth rate in the fourth quarter.

A big factor in the disappointing GDP number, the weakest in a year, was a slowing in consumer spending, which grew by just 1.9 percent in the first quarter, down sharply from 4.4 percent spending growth in the fourth quarter.

A variety of events from winter storms to falling export sales and a cutback in investment by energy companies contributed to the big drop in overall growth. Many economists believe growth will rebound in the current quarter and the second half of the year to rates around 3 percent.

The Federal Reserve took note of the first quarter weakness in a statement issued after its two-day policy meeting on Wednesday, saying it believed many of the factors holding back growth in the first quarter were likely to be temporary.

The Fed officials kept a key interest rate at a record low near zero and said they did not plan to start raising rates until labor markets strengthened further and they gain more confidence that low inflation will move back closer to the Fed's target of 2 percent.

Many economists believe the Fed will keep rates unchanged over the next two meetings in June and July with the first rate hike not occurring until September at the earliest.