U.S. consumer spending probably slowed in February as business investment and housing tumbled, underscoring the urgency of government efforts to thwart a deeper recession, economists said before reports this week.

Purchases rose 0.2 percent after gaining 0.6 percent in January, according to the median estimate in a Bloomberg News survey ahead of Commerce Department figures due March 27. Combined sales of new and existing homes likely dropped to the lowest level in at least a decade and orders for durable goods fell for a seventh straight month, other reports may show.

Mounting job losses and shrinking wealth are squeezing the consumer spending that makes up about 70 percent of the economy as Americans forego expensive items such as cars and homes. The economy may keep shrinking until Obama administration and Federal Reserve initiatives to calm credit markets take hold.

“Consumers will be more inclined to put off bigger-ticket purchases until they start to see a deceleration in job losses,” said Maxwell Clarke, chief U.S. economist at IDEAglobal in New York. Clarke said the first half of this year is “mostly about getting our legs back under us,” and that a recovery won’t happen until later this year.

Commerce’s spending report may also show incomes fell for the third time in the past four months, economists said.

Purchases of existing homes fell 0.9 percent last month to an annual pace of 4.45 million, according to the median estimate of economists surveyed. The National Association of Realtors’ report is due tomorrow.

Source: Bloomberg.com

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