Personal Income Up

Americans' incomes rose last month even faster than spending, something that hasn't happened since October.

The Commerce Department reported today that personal income, which includes wages, interest and government benefits, increased by 0.7 percent in March, the fastest pace since January. Income growth was slightly stronger than the 0.6 percent rise many analysts were predicting.

At the same time, spending rose 0.5 percent, right on target with many analysts' expectations.

The last time income rose faster than spending was five months ago, when Americans' incomes grew by 1.2 percent and their spending went up 0.5 percent.

Meanwhile, the personal savings rate, savings as a percentage of after-tax income, rose slightly to 0.4 percent in March from a record low of 0.2 percent in February, worse than the government previously estimated one month ago.

But the savings rate isn't as bad as it seems because the calculation doesn't take into account gains realized from such things as rising stocks and higher real estate values.

In February, income rose 0.4 percent, while spending grew by a torrid 1.4 percent, the fastest pace since 1994.

With plentiful jobs, rising incomes, stock markets gains and low inflation, Americans have been feeling in the mood to spend.

In the first three months of this year, consumer spending, the engine of the roaring economy, rose at an annual rate of 8.3 percent, the biggest jump in nearly 17 years, the government said Thursday.

The Federal Reserve has boosted interest rates five times since June 30 to slow the speeding economy, which grew at a 5.4 percent rate in the first quarter, and keep inflation under control.

The Fed's rate increases are designed to raise borrowing costs for big-ticket items such as homes and cars and in that way cool off demand and keep inflation from getting out of hand.

Those rate increases haven't had much impact yet and many economists believe the Fed will raise rates for a sixth time on May 16.

Today's report showed that Americans' wages rose by a strong 0.7 percent in March following a 0.3 percent increase the month before.

Farm proprietors' income rose a sizable 18.6 percent in March, lifted by federal subsidy payments to farmers. Those payments helped boost overall income. In February, farm proprietors' income rose 2.7 percent.

The report also showed that spending on non-durables, such as food and fuel, rose 1.4 percent in March, down from a 2.1 percent increase in February. But spending on durable goods, such as cars and washing machines, fell 2.5 percent after a 3.3 percent increase the month before.