U.S. Consumer Spending Slowed in March, Income Rose

US consumer spending slowed in March, income roseWASHINGTON -- Americans increased their spending more slowly in March, suggesting some are worried that their paychecks aren't growing fast enough.

The Commerce Department said Monday that consumer spending increased just 0.3 percent last month after a 0.9 percent gain in February.

Income grew 0.4 percent following a 0.3 percent gain in February. But after-tax income when adjusted for inflation increased just 0.2 percent in March. The gain followed two months of declines.

Consumer spending, which accounts for 70 percent of economic growth, rose 2.9 percent in the January-March quarter - the fastest pace in more than a year. The increase was a bright spot in an otherwise weak first quarter for economic growth.

But Paul Dales, senior U.S. economist at Capital Economics, noted that stronger spending in January and February drove the quarterly increase. And consumers spent more while saving less, which suggests they cannot sustain their spending pace without better pay.

"Real incomes will need to grow at a faster rate to prevent consumption growth from slowing," said Dales. He noted that Friday's report on April hiring is a crucial sign of where the economy is headed.

The government reported Friday that the overall economy grew at an annual rate of 2.2 percent in the January-March quarter. That's down from 3 percent annual growth in the October-December period. The weakness mainly reflected government budget-cutting and weaker business investment.

In March, consumers spent 0.9 percent more on non-durable goods, such as clothing. Spending on durable goods, such as cars and appliances, fell 0.3 percent. Spending on services such as utilities and rent was mostly flat.

An inflation gauge tied to consumer spending rose a modest 0.2 percent in March. Over the past 12 months, the index is up 2.1 percent, just above the Federal Reserve's 2 percent inflation target

Some economists worry consumers can't keep spending as freely as they did in the first three months of this year without bigger pay raises. After-tax income rose just 0.6 percent in the first three months compared with a year earlier. That was the smallest pay increase in two years.

The savings rate edged up to 3.8 percent in March, after dropping to a 30-month low of 3.7 percent of after-tax income in February.

A healthy job market could reinvigorate consumers. But the economy created just 120,000 jobs - half the pace of the previous three months.

Economists predict employers added 163,000 jobs this month, slightly better than March's figures but below the pace from December through February.

One positive change since the winter: gas prices appear to have peaked. That would give consumers more to spend elsewhere.

The nationwide average for a gallon of regular gasoline stood at $3.83 on Friday, down eight cents from a month ago, according to AAA's fuel gauge report.

Increase your money and finance knowledge from home

How to Buy a Car

How to get the best deal and buy a car with confidence.

View Course »

What is Inflation?

Why do prices go up?

View Course »

Add a Comment

*0 / 3000 Character Maximum

11 Comments

Filter by:
jlewis8676

My income went up last month because I worked 12 hours of overtime. Its been over 3 years since I had a raise. If I made more I would spend more . multiply this by a few million and gee, the economy grows. Simple economics.

May 01 2012 at 2:02 PM Report abuse rate up rate down Reply
Trudy Marie

Income rose? LMAO!!! Maybe in Washington for the FAT CATS but not for the MAJORITY of us just barely getting by!

May 01 2012 at 1:50 PM Report abuse rate up rate down Reply
Iselin007

BASF is more inclined to use visa workers so they get rid of US or citizens to displace them.Ever wonder why visas like the HB1 and B2 are now under scrutiny? Many visa requests are not for actual job openings they are for consultant agencies that stock pile them so they can sneakl people in to the USA for profit.

May 01 2012 at 12:10 PM Report abuse rate up rate down Reply
Iselin007

It's easy to stop spending when your savings is nearing zero and you haven't got any real income due to the on going situation.

When you send a resume or fill out a job application what makesn you think the Department of Labor or the BLS counts you in the workforce? Most employers don't even want a record of you being there!

May 01 2012 at 12:03 PM Report abuse rate up rate down Reply
Iselin007

One time I took a tax credit for being paid to go to school an the IRS made me pay it back! If your here illegally or with a bought immigration document from an actual government employee chances are you'll be one of the millions that never get caught.

May 01 2012 at 11:23 AM Report abuse rate up rate down Reply
Iselin007

Basically retrainees receive payment in lieu of unemployment so they can keep you from being counted as unemployed but if you still have some unemployment benefits left you'l receive them after you finish retraining however few any graduates ever get jobs especially older unemployed due to discrimination and the lack of entry level positions which are reserved for visa workers and their imported families.

May 01 2012 at 11:17 AM Report abuse rate up rate down Reply
Iselin007

Notice people who are in school retraining are not included in the unemployment figures just incase you were unaware of this little trick.

May 01 2012 at 11:13 AM Report abuse +1 rate up rate down Reply
Iselin007

Interesting how the part timers dropped in total when few places are returning to full time employment but then again figures are often bogus anyway.

May 01 2012 at 11:10 AM Report abuse +2 rate up rate down Reply
Iselin007

The state's politicians will hire their unemployed family and friends at taxpayer expense in order to get the unemployment rate down because both parties are running for elections his year and next . Neither side has taken care of abusive employers who continue to hire skanks to run their Human Resource Departments bent on ignoring the EEOC!

May 01 2012 at 11:01 AM Report abuse +3 rate up rate down Reply
brucebrummy

Completely meaningless! Spending during the first quarter of the year is driven by low and middle income families spending their tax refund checks. If we can't do better than this during these first few months, the Nation is really no better off economically.

May 01 2012 at 10:24 AM Report abuse +1 rate up rate down Reply