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Friday, 30 March, 2001, 16:55 GMT 17:55 UK
Mixed signals on US economy
Shopping mall.
Are the shoppers returning to the malls?
US consumers' spent more in February than in January, and their confidence in the economy's health rose in March after three months of growing pessimism, statistics revealed on Friday.

But manufacturing output continues to tumble as retailers reduce their inventories.

US Economy
Many economists fear the US is heading for a recession.
Confident consumers could be the factor that rescues the US economy from sliding into an economic recession according to earlier statements by the Federal Reserve chairman Alan Greenspan.

But the growth was not as strong as in January, when bargain sales led to a 1% increase in consumer spending, stronger than previously thought.

American shoppers' spending rose 0.3% in February as their income rose 0.4%, according to revised figures from the US Commerce Department.

Despite that figure, the savings rate was still a negative 1.3%, showing that consumers are still spending more than their income - and building up debts.

Consumer confidence

US consumers' renewed optimism was documented by an influential University of Michigan survey which rose to 91.5 from 90.6 in February.

The higher the figure, the more optimistic consumers are about the economic outlook for the next 12 months.

However, the Michigan survey did not confirm a dramatic increase in consumer confidence recorded in the rival Conference Board survey earlier in the week.

"What this Michigan index tells us is that there was a slight improvement in March from February, but mostly in expectations," said Morgan Stanley Dean Witter's chief US economist Richard Berner.

"This doesn't confirm that we're in recession, nor does it confirm that we're setting the stage for a rebound," he said.

But his colleague, Merrill Lynch senior economist Stan Shipley held a different view.

"The consumer recognizes we're not in a recession yet. As a result, there's been some firming in the confidence indexes," he said.

Manufacturing weakness

Manufacturing confidence however, continued to plummet.

The preliminary Purchasing Managers Index from the Chicago region fell to 35 in March compared to 43.2 in February.

Any figure below 50 indicates a contraction.

It was the collapse of business confidence in December that first alerted the Fed to the US slowdown.

"(It) goes to show the manufacturing sector is still mired in recession while consumer spending is still holding up. The only hope for the economy right now is that that consumer spending will get stronger and help pull the manufacturing sector out of the funk that it is in," said Mitch Stapley of Kent Funds.

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29 Mar 01 | Business
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