Consumer Spending Now Likely Fastest in Three Years

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by: The Good News Economist

U.S. retail sales posted a surprising gain in February despite falling car demand amid trouble at auto maker Toyota Motor Corp. (NYSE:TM) and fierce blizzards that crippled the East Coast for days.

Retail sales rose last month by 0.3%, the Commerce Department said Friday. An average of economists surveyed had forecast a 0.3% decrease in February sales. The Super Bowl early in the month had electronic store sales bounding higher.

"This is a pleasant surprise, especially in the light of the severe winter weather across large parts of the country last month," said Ian Shepherdson, an analyst at High Frequency Economics.

Retail sales data are an important indicator of consumer spending and consumer spending makes up 70% of demand in the U.S. economy.

The unexpected increase moved Macroeconomic Advisers to pushed their forecast for first-quarter gross domestic product growth way up, by four-tenths to 3.1%. Other analysts agree with the strong first quarter forecast.

"Consumers are beginning to come out of their shells," IHS Global Insight analyst Nigel Gault said. "Friday's data suggests that real consumer spending will rise about 3% in the first quarter, the fastest increase in three years."