"Household income growth will be a bit stronger as the labor market improves, so the consumption numbers will look better," said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York and a former Fed researcher who specialized in consumer spending. "It'll be a solid year, not a spectacular one."
Delhaize Group SA, the owner of the U.S. Food Lion supermarkets, this month said the improvement in the labor market is encouraging.
"There are some good forward-looking economic indicators here in the U.S. that would help give all of us some optimism," Ronald Hodge, chief executive officer of Delhaize's U.S. business, said on a March 8 conference call with analysts. "Unemployment has started to decrease in every one of our major markets and that is a very, very key sign in our business."
Gains in hiring and wages are also lifting Americans' moods. The Bloomberg Consumer Comfort Index, which has advanced in all except two weeks so far this year, rose to an almost four-year high in the period ended March 4.
Investors are also growing more upbeat. The Dow Jones Industrial Average yesterday jumped to the highest level since 2007, and the Nasdaq Composite Index climbed to the highest level since 2000. Yesterday's 1.8 percent gain in the Standard & Poor's 500 Index extended the gauge's advance this year to 11 percent, the best start since 1991.
Households may be more inclined to spend in the second half as gains in wealth eventually drive purchases, Maki said.
"The recent gains in the stock market will start to show through more significantly in consumer spending," he said. "We're seeing demand gradually recover."
The jobless rate will decline to 8.1 percent by year-end, according to the median forecast of economists surveyed. It will average 7.8 percent next year and 7.3 percent in 2014, the survey showed.
The Fed's projection of the jobless rate over the long run, the level that policy makers believe will keep inflation steady, is 5 percent to 6 percent.
"The unemployment rate has declined notably in recent months but remains elevated," the central bank said in a statement after policy makers met yesterday in Washington. Economic conditions warrant keeping interest rates "exceptionally low" at least through late 2014 "to support a stronger economic recovery," they said.