Economic Update for 4/2/2007

Consumer spending rose 0.6% in February, the best showing since a 0.7% jump in December, the Commerce Department reported March 30. The gain was double what analysts had expected, which should help alleviate recession fears fueled by a slump in housing and the domestic auto industry.

Personal income also was up 0.6% in February, which followed a 1% surge in January. Even with the rise in income, the savings rate remained at a negative 1.2% in February, the 23rd consecutive month the savings rate has been in negative territory.

Sales of new homes dropped 3.9% in February to a seasonally adjusted annual rate of 848,000 units, the slowest pace in nearly seven years, the Commerce Department said March 26. Meanwhile, the median price of a new home fell to $250,000 in February, down 0.3% from a year ago.

Orders to factories for durable goods -- big-ticket items expected to last three or more years -- increased 2.5% in February. Even with the rebound from January's 9.3% drop, the gain was smaller than the 3.5% gain expected by Wall Street.

On March 30, oil prices reached $66.55 a barrel on the New York Mercantile Exchange, the highest level in six months. Concern over rising gasoline prices helped undermine consumer confidence, as the Conference Board's Consumer Confidence Index fell from 111.2 in February to 107.2 in March. The March index was the lowest since November when the reading was 105.3.
This week look for updates on factory orders on April 4 and unemployment on April 6.