Government Reports Show Consumer Spending Fueling Economic Recovery

A string of government reports show that the American consumer is making more money and spending again, providing impetus for a sustained economic recovery.

Personal income jumped 0.3%, or $32.3 billion, in April following a 0.1% rise the month before. The Commerce Department said individual spending rose 0.6%, or $36 billion, last month, the sixth consecutive month spending has increased. Both figures matched estimates from economists surveyed by

Consumer spending makes up about 70% of the U.S. economy. Economists are keeping a close eye on income and spending because so far, this has largely been a jobless recovery.

But the increase in spending is "a good sign," Robert Brusca, chief economist at FAO Economics told

"The economy needs spending more than anything else right now," he said, adding that the savings rate will begin to go up once the recovery has reached "a more mature stage."

"But right now we need spending," he said. "That's what will create jobs and move the economy ahead."

The report comes after government data showed Friday that U.S. gross domestic product, the broadest measure of economic activity, rose at a 3.2% annual rate in the first three months of 2010.

Manufacturing and Car Sales Jump

U.S. factories unexpectedly increased output in March, fueled by demand for capital equipment and petroleum.

The 1.3% increase in bookings matched February's gain, which was more than twice as large as previously estimated, the Commerce Department said. Sales climbed 2.2%, the most since November 2007.

Companies are ramping up to meet rising foreign and domestic demand, in a sign the economy is rebounding from last year's recession. Businesses continue to replenish inventories and are hiring more workers, which may force factories to increase output in coming months.

"A lot of manufacturers may be struggling to keep up with demand," Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, told Bloomberg News. "We're seeing clear demand improvements from both consumers and businesses that should provide a strong tailwind for several months at least."

The increase in consumer spending was also reflected by a healthy increase in U.S. automobile sales. Automakers sold 982,131 vehicles last month, according to Autodata Corp., up 20% from the depressed levels of April 2009.

Chrysler LLC, Ford Motor Co. (NYSE: F) and Toyota Motor Corp. (NYSE ADR: TM) all reported increases of about 25%. General Motor's results trailed with 7.2% growth, mainly because it's phasing out four brands while it restructures. But all four brands it is keeping - Chevrolet, Cadillac, Buick and GMC - saw sales rise 20%.

Analysts were encouraged that the increase came despite fewer sales from buyers seeking incentives.

Toyota boosted incentives in March to fight off a sales slump from its recalls crisis. Other carmakers matched the moves, bringing a surge of buyers into the market.

But in April, "there weren't as many deal-seekers," Jessica Caldwell, an analyst at, an automotive website told The Wall Street Journal.

"A lot of the people who were looking for deals have already bought," she said. April also is income-tax time, which tends to keep some shoppers away, she added.

A 42% increase in sales of F-150 pickup trucks boosted Ford.

Robust sales of pickup trucks are seen as a good sign for the economy because they are associated with the housing industry.

Building permits for single family homes climbed to 685,000 in March, up 7.5% from the revised February figure and a whopping 34.1% above the 2009 rate, the government recently announced.

Actual housing starts in March stood at 626,000, 1.6% above the revised February estimate, an increase of 20.2% over the March 2009 rate.

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