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Economy Remains In High Gear Rising Incomes, Spending Point Toward More Good Times Ahead

Confident consumers earned and spent more money in February, suggesting the economy has the fuel it needs to charge ahead into its eighth year of expansion.

Personal incomes rose 0.6 percent in February, the same as in January, the Commerce Department said. Spending rose 0.4 percent in February after increasing 0.7 percent a month earlier.

“Throw in a big gain in stock prices, high confidence levels, a flurry of housing and mortgage refinance activity, and you have all the ingredients for a continued surge of consumer spending,” said Ken Mayland, chief economist at KeyCorp in Cleveland.

The University of Michigan’s consumer sentiment index underscored that point by holding above 100 for the 12th straight month in March. It registered 106.5 this month compared with 110.4 in February, according to investors with access to the confidential report.

Retail chains also reported sales at stores open at least a year rose a surprising 5.9 percent in February as mild winter weather on the East Coast and in the Midwest drove early purchases of spring merchandise. Wal-Mart Stores Inc., the world’s largest retailer, led the gain. Home sales are also booming.

The economy probably won’t match last year’s 3.8 percent growth rate, the best in nine years, according to many forecasts, because the financial crisis in Asia is hurting demand for U.S. exports.

Federal Reserve policy-makers, meeting Tuesday on interest rates, will likely leave their target federal funds rate for overnight loans between banks at 5.50 percent as they watch for slower growth stemming from the turmoil in the Pacific Rim.

The Commerce Department also said Friday:

Disposable income, or the money left over after taxes, increased 0.6 percent in February after rising 0.8 percent during January.

The savings rate in February rose to 4.3 percent - the highest since it was at the same level in June 1997 - from 4.2 percent in January.

Interest payments to businesses was little changed from a month earlier at $160.6 billion.

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