Consumer spending likely to boost growth in 2014

AP Economics WriterJanuary 22, 2014 

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 higher-cost items such as cars and appliances.

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.

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