“Nonetheless, the March spending figure is still disappointing considering that real disposable income increased by a healthy 0.4% m/m last month”.
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Consumer spending rose 0.1 percent in March, the Commerce Department reported on Friday, following a recent string of lackluster months.
Personal income rose 0.4 percent in March after nudging up 0.1 percent in February. Consumer spending, which accounts for more than two-thirds of US economic activity, ticked up 0.1 percent in March after a 0.2 percent gain in February.
The US economy almost stalled in the first-quarter, expanding only 0.5 percent at an annual rate.
It was the slowest increase in two years.
The government’s release of personal income, spending and inflation numbers showed an economy that is growing, but has little evidence of inflation. Spending on durable goods, including new cars, dropped 0.6% in March and spending on non-durable goods rose slightly, due largely to lower fuel prices. Inflation remains well short of the Federal Reserve’s 2% target, and combined with a first-quarter total compensation increase of 1.9% indicates that US workers are earning enough to cover higher costs. Excluding volatile energy and food prices, prices increased 1.6% for the same period.
The central bank hiked rates in December for the first time in almost a decade and Fed policymakers earlier this year forecast two more rate hikes for 2016. The increase was below Wall Street expectations: economists surveyed by MarketWatch had forecast a 0.2% increase.
The core PCE index climbed 1.6% from March 2015 to March 2016, down a tick from the previous month.
He now expects milder growth of 2.3 percent growth this quarter.
The big rise in incomes and the small gain in spending resulted in a jump in the personal saving rate to 5.4 per cent of after-tax incomes, up from 5.1 per cent in February. Economists hope consumers will put those savings to work in coming months. Consumer spending is expected to regain momentum as wages steadily increase.
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Economists believe overall growth will rebound to around 2 percent in the current quarter and then strengthen to around 2.5 percent for the second half of the year.
