Warm Weather Lures Shoppers to Spend; Housing Still Weak | AccountingWEB

Warm Weather Lures Shoppers to Spend; Housing Still Weak

Factories responded to an increase in consumer spending in January, by cranking up production in February.

Analysts say the economy is showing strong growth after suffering for three months last year from the hurricanes along the Gulf Coast and high energy prices.


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The unusually warm weather in January apparently drew in the shoppers. Spending jumped 0.9 percent, which is the biggest increase in six months. An index of national factory activity rose to 56.7 in February, from 54.8 in January, according to Reuters.

"You can't keep a good consumer down and the American household is one great customer," Joel Naroff, chief economist at Naroff Economic Advisors, told the Associated Press.

Construction spending did not match January's rise in consumer spending-it grew only 0.2 percent, below expectations. Economists had predicted a 1.1 percent increase.

"The January gain in construction spending was surprisingly weak given the recent strength in housing starts and unseasonably warm weather," said Steven Wood, chief economist at Insight Economics.

Private home building increased only 0.1 percent. Residential construction is slowing, and some observers believe it will slow even more as mortgage rates increase.

A separate study showed that consumers felt less optimistic in February. While analysts had expected a consumer confidence index of 104.0, the index fell to 101.7 in February, from 106.8 in January. The report wasn't seen as alarming because it covers just one month, the AP reported.

"There is still a lot of uncertainty out there that is making people a little bit more cautious," said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. But he added "consumers are still feeling pretty good."

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