Dow Jones Boosted by Growth in US Consumer Spending

Financial NewsIn the financial news this week, fears of a continued slowdown in consumer spending in the US proved to be unfounded as official figures showed a rise of 0.2% in March.

Although this was the lowest rise in consumer spending since the start of the year, following growth of 0.3% and 0.7% in January and February respectively, many analysts had anticipated no change in spending levels.

However the prolonged cold weather in the US is believed to have resulted in increased spending on household and commercial fuel which has led to the higher than expected figure published by the Commerce Department.

The US also recently unveiled that its economy has grown by an annualised rate of 2.5% in the first quarter largely as a result of strong consumer spending (which accounts for two thirds of the country’s economic activity) and a 4.1% fall in Government expenditure, particularly on defence. Having now grown for 15 consecutive quarters since the end of the recession in 2009, the US economy is regarded as fairing more favourably than many national economies in the Eurozone.

Contrasting reactions on the consumer spending growth

Traders appeared to respond positively to the news of the growth in consumer spending with the Dow Jones closing at 14,181.75, up 106.2 points. The S&P 500 added 11.37 points, passing its previous record high.

However analysts are divided as to the significance of the figures, with some suggesting that the economy will not slow as steeply as feared in the second quarter of 2013.

Others, though, are highlighting the key part played by the weather in helping to drive up consumer spending, arguing that this trend is unlikely to continue beyond the end of the winter as consumers’ reliance on the utilities lessens and their reluctance to purchase goods endures.

Leave a Reply