Consumer Spending
Consumer purchases, the biggest part of the economy, rose at a 2.1 percent annualized rate, little changed from the previously estimated advance of 2.2 percent. The median forecast in the Bloomberg survey projected a 2.3 percent increase. Personal consumption added 1.47 percentage points to growth. It grew at a 1.6 percent pace in the third quarter.
Today’s report also revised income data for the third quarter. The gain in wages and salaries for the period from July through September from the prior three months was revised up by $6.8 billion to $39.3 billion.
After-tax income adjusted for inflation rose at a 0.7 percent annual rate in the third quarter, revised up from a previously estimated 0.5 percent advance. That resulted in shifting the fourth-quarter gain to 6.2 percent from 6.8 percent.
Current Headwinds
Higher payroll taxes and rising gasoline prices are taking a chunk out of discretionary income this quarter, which may make it difficult to sustain household purchases at the same pace as in the fourth quarter.
Congress and President Barack Obama allowed the payroll tax to return to its 2010 level of 6.2 percent from 4.2 percent at the start of the year, which means an American who earns $50,000 is taking home about $83 less a month.
The average price of a gallon of regular gasoline at the pump rose to $3.79 on Feb. 26, the highest in more than four months, according to AAA, the biggest U.S. motoring group.
Growing demand for autos is underpinning household spending, which accounts for about 70 percent of the economy. Cars and light trucks sold at a 15.2 million annual rate in January after 15.3 million in December, according to data from Ward’s Automotive Group. Including November’s 15.5 million rate, auto sales over the past three months have been the strongest in five years. February data is scheduled for release tomorrow.
Business Investment