"The economy is in a very good place right now ahead of the fiscal restraint"
- Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd.
A cluster of positive data from the U.S. is signalling an improving job market, which in turn is spurring demand for goods. According to the Commerce Department, consumer spending, which accounts for around 70% of the economy, added 0.7% after a 0.4% gain the prior month that was bigger than previously estimated. Income increased a healthy 1.1% after tumbling 3.7% in the first month of 2013, as a sustained pace of steady job gains is starting to boost wages. Personal income came sharply higher, due to a rush to pay dividends and bonuses before the upcoming tax hikes.
Also Friday, the University of Michigan said that a gauge of consumer sentiment soared in the second half of March by a record amount, due to the improvement in the labour market and even despite budget cuts. An index on consumer sentiment came in at 78.6, up from 77.6 the month before, well above the median forecast of 72.5 expected by analysts.
"The economy is in a very good place right now ahead of the fiscal restraint," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. "This recovery is sustainable. Consumers are in the driver's seat."
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