consumer spending income rise march tax hike
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WASHINGTON -- U.S. consumer spending unexpectedly rose in March as benign inflation supported household's spending power, a hopeful sign for an economy that lost significant momentum towards the end of the first quarter.

The Commerce Department said Monday consumer spending advanced 0.2 percent last month after an unrevised 0.7 percent increase in February.

Economists polled by Reuters had expected spending, which accounts for about 70 percent of U.S. economic activity, would be flat last month.

After adjusting for inflation, spending increased 0.3 percent after advancing by the same margin in February. The spending details were included in Friday's first-quarter gross domestic product report.

The report offered hope that growth in the second quarter would probably not slow as sharply as currently feared. The economy grew at a 2.5 percent annual pace in the first three months of the year.

Output in the first quarter was boosted by a brisk 3.2 percent increase in consumer spending, despite the end in January of a 2 percent payroll tax cut.

Last month, income rose 0.2 percent after a 1.1 percent increase in February. Income at the disposal of households after inflation and taxes increased 0.3 percent after a 0.7 percent gain in the prior month.


With income growth matching spending, the saving rate -- the percentage of disposable income households are socking away -- was unchanged at 2.7 percent.

The report showed little inflation, with a price index for consumer spending dipping 0.1 percent, the first drop since November. A core reading that strips out food and energy costs was flat.

Over the past 12 months, inflation has risen just 1.0 percent, the smallest gain since October 2009 and a slowdown from the 1.3 percent logged in the period through February.

Core prices are up 1.1 percent, the smallest rise since March 2011 and well below the Federal Reserve's 2 percent target. Core PCE had increased 1.3 percent in February.

The lack of inflation pressure gives the U.S. central bank scope to maintain its very easy monetary policy stance.

"People are going to pick up how low inflation is and how low it's going. That's what the Fed will be keeping an eye on given the weak demand environment," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, N.C.

Fed officials meet this week to assess the health of the economy. The Fed is widely expected to keep purchasing bonds at a pace of $85 billion a month.


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16 Comments

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nthereoff

Guess we are spending more? That must be the reason I see more and more people returning soda cans for deposit.By the way I'm one of them.

April 30 2013 at 8:27 AM Report abuse rate up rate down Reply
nthereoff

Spend your money it may not be worth anything soon

April 29 2013 at 5:32 PM Report abuse -1 rate up rate down Reply
tmoschetti

"Americans' Spending, Income Rises in March Despite Tax Hike"

But not nearly so much as our already UNSUSTAINABLE debt. As of March 31, 2013, the US debt/GDP was 104.8%, up from 103% as of December 31, 2012 or a debt growth rate that would make the most insolvent Eurozone nation blush.

So Reuters, please explain to us how we possibly survive such egregious numbers. Right, like the imploding European Union countries can't!

April 29 2013 at 2:34 PM Report abuse rate up rate down Reply
smaselli13

Look at where these stats originated...................the govt. This is the Obama propaganda machine at full speed, disseminating false info. When does it stop?

April 29 2013 at 11:45 AM Report abuse rate up rate down Reply
jrb359

Uh Oh. Once Progressives hear about this they'll run out and try to raise taxes again for their obsession with out of control wasteful spending. Hold onto your wallets!

April 29 2013 at 11:32 AM Report abuse rate up rate down Reply
alamaden

ahh got it... so that means that when there is a tax cut American workers income will go down??? well lets raise the taxes a few times more then???

April 29 2013 at 11:14 AM Report abuse rate up rate down Reply
axman922

The thing these idiots dont take into account is people have been unable to spend money on items they needed for 6 to 8 years and now they probably have to purchase those items as they are way out dated , since we no longer make stuff that lasts 20 to 30 years ( wouldnt keep big business FAT ) then the need out wieghs saving the dimes and nickels the politicians and big business have left us , why is it we (the consumers) have to find ways to live within our budgets but they ( politicians & big business ) dont ? they go on making record profits ( BIG Business ) or making major investments above what The current tax base , causing higher tax rates (politicians ) and we stand by and take it ! all the while they tell us " unemployment is low " but 11,000,000 employees who were put out of work plus an unknown number who have given up even looking for work (those people are not counted as unemployed ) are out there costing all of us because they are not working and the cost is put on the people who do work ( in many , many different ways ) Im sick of them trying and succeding in telling us its getting better with problems like I've mentioned here And Im sure other Related problems exist which I havent noticed After all I'm only one person. It seems to me that if business would let go of some of those profits and politicians would pay more attention to putting people back to work that they would both end up with more to deal with ( more people working makes more people spending and more taxes with less pressure put on those already working , and less being spent on welfare and other programs ) what idiots we have running the Country & businesses that all they do is put it on the working (men & women) and they dont solve any real issues. Im a democrat and even I know it took both parties ignorance to put us in this situation yet they cant balance a thing without puffing up thiers chests & beating on them with thier fists like they are doing anything to solve the real issue . I say get rid of the whole stinking bunch and start over might slow down corruption and cause a new direction for the country.

April 29 2013 at 11:11 AM Report abuse -1 rate up rate down Reply
mine

Spending on necessary items that they held off on for so long, Maybe a couple more Sandy's would help... The government is now releasing the money to help these people rebuild. The poor in New Orleans got it faster.

April 29 2013 at 10:30 AM Report abuse +2 rate up rate down Reply
1 reply to mine's comment
axman922

except Bush didnt help New Orleans becuse he had started 2 wars and was spoon feeding Dick Chaneys Company with our tax money while letting the banks destroy the American dream ! There are still people down there ( EVEN AFTER THE LATEST superbowl Being played there ) that havent been set right ! its always the poor who are forgotten, we as citizens need to look at the whole picture not the party bull crap that is handed out ! we all suffer when that garbage is believed. but I agree with most of your statement .

April 29 2013 at 11:26 AM Report abuse +1 rate up rate down Reply
Ken

So dose this mean tax the people more and they will spend more. I think people are loading up there credit cards more.

April 29 2013 at 10:07 AM Report abuse +2 rate up rate down Reply
bchrist751

This is good news for the Markets...I don't believe inflation is low, but if the markets gain support that is good for investors.

April 29 2013 at 9:30 AM Report abuse -1 rate up rate down Reply