Ahead of the Bell: US consumer spending

US consumer spending likely showed small increase in February

Associated Press
US consumer spending edges up 0.1 percent in February
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FILE - In this Friday, Jan. 23, 2015, file photo, vehicles form a line behind a motorist gassing up at a gas station in Newark, N.J. The Commerce Department releases its February report on consumer spending, which accounts for 70 percent of economic activity, on Monday, March 30, 2015. (AP Photo/Julio Cortez, File)

WASHINGTON (AP) -- The Commerce Department releases its February report on consumer spending, which accounts for 70 percent of economic activity. The report will be released Monday at 8:30 a.m. Eastern.

SLOW SPENDING: The expectation is that February spending rose a slight 0.3 percent, according to economists at IHS Global Insight.

SPENDING SOFT: In January, consumer spending fell 0.2 percent following a 0.3 percent decline in December. The weakness in those two months in part reflected slumping gasoline prices.

The government reported that retail sales, one of the components of consumer spending, fell 0.6 percent in February, the third straight monthly decline.

Americans cut back on car buying by the most in more than a year and sales also fell at restaurants, home improvement centers and electronics and appliance stores. Harsh winter weather in much of the country in February was blamed for the decline.

The weather-related weakness is expected to dampen overall economic growth during the January-March quarter with many economists believing growth will slow to around 1.5 percent during the quarter. But analysts are also optimistic that there will be a rebound in coming quarters to growth of 3 percent or better.

If the economy does hit 3 percent growth this year, it would be the fastest pace for the economy in a decade.

The reason for the optimism is a belief that the strong employment gains of the past year will continue this year and the stronger job market lead to rising household incomes and more consumer spending.

Fed Chair Janet Yellen said Friday that continued improvement in the economy means an increase in the Fed's key interest rate could come later this year. But she said that any rate increases will likely be very gradual.

Many economists believe that with inflation still running below the Fed's target of 2 percent, the Fed will be cautious in raising rates with the first rate hike not occurring until September. The Fed's target for short-term rates has been at a record low near zero since December 2008.

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