Shoppers drive up economic growth
WASHINGTON — The economy is rebounding as America's shoppers snap back to life.
That adds up to what should be a solid showing in the opening quarter of this year. The fresh picture of the nation's economic health that the Commerce Department will release Friday is expected to provide the strongest evidence yet that the economy is strengthening.
Consumers, the drivers of overall economic activity, finally seem to be spending more. To be sure, shoppers aren't spending with the kind of abandon that usually sparks the early stages of economic recoveries. But they're spending enough to keep the economy expanding.
The economy grew at a 3.4 percent annual rate in the January-to-March quarter, according to Wall Street economists surveyed by Thomson Reuters. It would mark the third straight quarterly gain as the U.S. heals from the longest recession since the 1930s.
Multiple signals suggest the U.S. economy has turned a corner. Employers are creating jobs again — a net total of 162,000 jobs in March, the most in three years. Manufacturers are boosting production. Consumer confidence is higher.
And a rising number of companies — from Ford, Caterpillar and Whirlpool to UPS, Estee Lauder and Royal Caribbean Cruises — are seeing profits grow. General Electric says the "clouds are breaking" after having suffered one of its worst years in 2009.
A rebound in consumer spending is expected to have contributed significantly to the first-quarter growth.
Economists predict consumers boosted their spending 3 percent to 4 percent in the first quarter. A figure in that range would be the strongest increase since before the recession began.
Looking ahead, analysts say consumers won't likely be going on spending sprees. They note the unemployment rate remains at 9.7 percent and is expected to stay high for the next year or so. Sluggish income growth and low demand for loans will further restrain spending, they say.
"I think the new normal means consumers won't be returning any time soon to their spendthrift ways," said Rajeev Dhawan, director of Georgia State University's Economic Forecasting Center.
