Consumer Income, Spending Up

Consumer spending and personal income posted solid gains in March, with both notching their fourth consecutive monthly rise, the government said Monday.

Consumer spending rose 0.4 percent last month to $7.29 trillion after a 0.6 percent gain in February, the Commerce Department said.

Personal income also grew 0.4 percent in March to $8.92 trillion following a 0.6 percent increase a month earlier.

The gains in both spending and income matched the expectations of economists polled by Reuters.

Consumers, whose spending accounts for two-thirds of all economic activity in the United States, bought throughout the slump, preventing the economy from sinking deeper into recession last year.

As a result, there could be less pent-up demand coming out of the downturn, making for a less than sizzling rebound, Federal Reserve Chairman Alan Greenspan has said.

How the recovery ultimately shapes up will depend on the behavior of consumers and a turnaround in business investment spending, which dropped during the recession, economists say.

Spending on durables — such as cars and appliances — rose 0.5 percent in March, down from a 1.4 percent gain. For non-durable goods, such as food and clothing, spending edged up 0.2 percent, compared with a 0.4 percent increase the month before. Spending on services rose 0.5 percent, slightly less than the 0.6 percent increase in February.

The report also showed that disposable incomes — income after taxes — went up 0.5 percent in March, after a 0.7 percent gain.

Because disposable incomes increased more quickly than spending in March, the nation's personal savings rate, which is savings as a percentage of after-tax income, was lifted to 2.2 percent, the highest since September.

In an effort to rescue the economy from the grips of recession, the Federal Reserve slashed short-term interest rates 11 times last year. Citing signs of a rebound, the Fed opted to leave rates — now at 40-year low unchanged in January and March. Many economists believe the central bank will hold rates steady at its May 7 meeting and possibly into the summer.