"Wages are picking up, and people are feeling better," said Chris G. Christopher, a senior principal economist at IHS Global Insight in Lexington, Massachusetts. "That makes for a positive feedback for consumer spending. The gasoline-price increase isn't welcome news, but the American economy and American consumer can cope with it this time around."
Gap Inc., the largest U.S. apparel chain, and Target Corp., the second-largest U.S. discount retailer, were among retailers that yesterday reported gains in February sales at stores open at least a year, exceeding analysts' average estimates. Warm weather may have helped to lift purchases of spring merchandise.
Demand for automobiles improved as well. Auto sales in February rose to the fastest pace in four years, led by Chrysler Group LLC and a surprise gain from General Motors Co. Light- vehicle sales accelerated to a 15.03 million annual rate, the strongest since February 2008, according to Ward's Automotive Group.
Revisions to the GDP figures on Feb. 29 showed wages and salaries from July through September rose $107.2 billion, up from the $24.8 billion gain initially reported. They climbed another $90.1 billion last quarter, up from a prior estimate of a $66.1 billion gain.
The increases helped boost the savings rate to 4.5 percent in the fourth quarter from a previously reported 3.7 percent, and to 4.6 percent in the prior three months from an initial estimate of 3.9 percent. With the improvement, there may be a less pressing need for consumers to use any additional income this year to rebuild savings.
The savings rate "drifted down only modestly" through last year from 5 percent in the first quarter, according to Julia Coronado, chief economist for North America at BNP Paribas in New York.
"This is significant as it removes what we considered to be a potential headwind to growth as consumers seek to restore higher saving rates," Coronado said in a note. "Recent improvement in the labor market could lead to continued gradual firming in consumer spending growth without sacrificing saving."
The savings rate was 4.6 percent in January, following 4.7 percent a month earlier, yesterday's personal income and spending report showed.
The quarterly revisions to wages also indicate the government has been undercounting the number of jobs created, and that workers' earnings and hours may be higher than recent reports show, LaVorgna said.
"Maybe we ought to give the economy a little more credit than we did" so far, he said.