Americans are spending again after lying low for a few months

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Did the Easter Bunny bring good news for the U.S. economy in March? It sure did for retailers. Sales are expected to rise for the first time in four months.

Baseball fans aren’t the only ones experiencing spring fever. Most Americans are also getting out and spending more money after hibernating toward the end of winter.

The evidence? Sales at U.S. retailers are expected to climb in March and end a streak of three straight declines, according to a MarketWatch poll of economists.

The increase in spending is unlikely to save the U.S. from a downshift in first-quarter gross domestic product, the official scorecard for the economy. But it will be a sign the recent lull in consumer spending is about to end.

The dropoff in spending to start the new year was not a shocker. After all, consumer spending soared 4% in the final three months of 2017 to mark the biggest increase in three years. A comedown was in order, especially after the savings rate sank to a 13-year low.

Now that’s about to change.

Americans have partly rebuilt their savings since then, for one thing. The savings rate has risen to 3.4% from just 2.5% at the end of last year.

The Trump tax cuts have also boosted take-home pay while income-tax refunds are giving consumers a new stash of cash.

A study by Bank of America Merrill Lynch suggests aftertax pay was 7.5% higher in March than it was in the same month a year earlier. That’s a lot of extra cash for households to spend.

The March retail numbers will get an additional boost from strong auto sales and a late Easter that resulted in a burst of holiday spending in the last weekend of the month.

However, gas-station sales fell sharply in March owing to a temporary drop in oil prices that has already been reversed. Good news for drivers, but it will depress the headline number on retail sales.

“After a blockbuster end to 2017, retail sales have started 2018 with a whimper and that likely won’t change much in March,” said economist Andrew Grantham of CIBC World Economics.

Still, rising retail sales would be just one of many signs the U.S. economy remains on firm footing even though the current expansion is almost nine years old and is already one of the longest ever.

Yet a strong economy, highlighted by a 4.1% unemployment rate and the tightest labor market is two decades, presents a dilemma for the Federal Reserve.

The Fed will be under increasing pressure to raise interest rates more aggressively if strong growth raises inflation, but the central bank is likely to experience blowback from Washington on concerns that higher borrowing costs will harm the economy.

Read: Fed’s Bullard says not all FOMC members see need for higher interest rates

A slew of senior Fed officials are making the rounds this week to lay out their views on the economy and the future path of the Fed. Wall Street will be watching closely.

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