The biggest gain in US consumer spending in two years probably helped the world’s largest economy accelerate in the first quarter and housing made further progress, economists said reports this week will show.
GDP rose at a 3.1 percent annual rate after expanding at a 0.4 percent pace in the final three months of last year, according to the median forecast of 67 economists surveyed by Bloomberg ahead of US Department of Commerce data due on Friday.
Sales of new and previously owned houses climbed, other reports may show.
The expansion picked up as rising stock prices and home values boosted household wealth, helping Americans weather an increase in the payroll tax. Recent data indicate the strength may not be sustained as the reduction in take-home pay begins to pinch and across-the-board cuts in planned federal spending start to weigh on the job market and corporate investment.
“It was a catch-up after a very weak quarter,” said Ryan Wang, an economist at HSBC Securities USA Inc in New York.
Now, “momentum is slowing,” he said.
The GDP report may show consumer spending, which accounts for about 70 percent of the economy, grew at a 2.8 percent annual rate, the strongest since the first quarter of 2011, according to the Bloomberg survey median.
Purchases advanced at a 1.8 percent rate from October through December last year.
The lagged effect from a 2 percentage-point increase in the payroll tax at the start of the year may take a toll this quarter, economists said.
The economy will cool to a 1.5 percent pace, before accelerating to an average 2.4 percent rate in the last six months of this year, a separate Bloomberg survey showed.
Automobile purchases remain a bright spot. Cars sold at an average 15.3 million annualized rate in the first quarter, the most since the same period in 2008, according to figures from Ward’s Automotive Group.
“The only negative real headwinds we see are higher taxes and potentially lower government spending,” Kurt McNeil, vice president of US sales and service at Detroit-based General Motors Co, said on an April 2 conference call.
“Everything else seems to be pretty positive,” he said, mentioning jobs, housing and stock market performance.
The real-estate market continues to improve as borrowing costs near a record low help buyers, figures from the National Association of Realtors in Washington may show tomorrow.
Purchases of previously owned homes rose for a third month last month, increasing 0.4 percent to a 5 million annualized rate, the highest level since late 2009, according to the Bloomberg survey median.
The last time sales exceeded a 5 million pace was November 2009, when first-time homebuyers rushed to take advantage of a temporary tax credit.
New home sales, due from the US Department of Commerce tomorrow, climbed 1.2 percent to a 416,000 annual pace, the median forecast in the Bloomberg survey shows.
Business investment, another contributor to growth, is poised to cool as the so-called sequestration, or US$85 billion in automatic budget cuts that started on March 1, take hold.
Bookings for goods meant to last at least three years fell 3 percent last month after a 5.6 percent jump in February that was the biggest since September last year, according to the Bloomberg survey.