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Consumer spending likely to boost growth in 2014

Jan. 22, 2014 @ 07:24 AM

WASHINGTON — Hopes are rising that consumers will drive stronger growth in 2014 after they stepped up spending at the end of last year in the United States and Europe.

The outlook for spending is brightening even though growth is weakening in some large emerging economies and slowing the sales of consumer product giants such as Unilever and Procter & Gamble.

Several trends are boosting consumer spending in devel­oped countries: Inflation is low, enabling shoppers to stretch their dollars, euros and yen. The Federal Reserve, the Bank of England and other cen­tral banks are keeping inter­est rates super-low. Those low rates have made it easier for borrowers to afford higher­cost items such as cars and appl i a nce s .

Global retail sales growth jumped to a 5.4 percent annu­al pace in the three months through November, accord­ing to economists at JPMorgan Chase. And global auto sales reached an all-time high in December, the bank said.

“It was a year of big improve­ment in consumer spending after two years of very weak growth,” said David Hensley, a global economist at JPMorgan Chase. “Businesses were pleas­antly surprised by the increase in consumption.” Even in Europe, where growth remains slow after the region emerged from its lon­gest-ever recession last year, consumers appear willing to spend more. Retail sales spiked 1.4 percent in November, the biggest increase in 12 years.

In the United States, Morgan Stanley economists forecast that consumer spending rose in the final three months of the year at its fastest pace in three years.

Consumer spending in Japan could jump by as much as 7 per­cent in the first quarter of 2014, JPMorgan calculates. Much of that gain might reflect greater spending ahead of an April increase in a national sales tax, from 5 percent to 8 percent. Sales will likely fall back after that, making it harder to deter­mine broader trends.

With more consumers will­ing to open their wallets, busi­nesses will also likely start spending more on machinery, computers and other equip­ment, Hensley said, providing an additional spark to growth.

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