(WASHINGTON) — Americans are spending more despite higher taxes.
The U.S. Commerce Department reports that consumer spending was up 0.2 percent in March over February and rose at the fastest pace in more than two years in the first quarter overall.
Diane Swonk, chief economist at Mesirow Financial, said Monday that spending on services like heating drove the increase.
“People ended up spending much more on things like utilities rather than going out and spending it on spring clothing,” Swonk explained. “In fact, retailers complained that they had to discount a lot of spring clothing in the month of April, because they didn’t sell what they usually would leading up to Easter.”
Big ticket items and construction were up because of Hurricane Sandy, Swonk said.
“Some of the previous two months were buoyed somewhat by Hurricane Sandy and the replacement demand associated with that,” she said. “We’ve also seen a lot of refinancing activity redeployed into big ticket spending that abated in the month of March.”
“It’s going to be a very uneven year and that’s why the Federal Reserve is so committed to stimulating the economy,” she concluded.
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