U.S. Consumer Spending Drop Steepest in Year

Consumer spending, a key factor in the economy’s expansion, fell 0.5% in March, the steepest monthly decline in more than a year, the Commerce Department said today.

The figure was part of a report in which the government said Americans’ personal income rose 0.5% last month after a 0.4% gain the previous month. But spendable income actually dropped 0.5% because of Internal Revenue Service delays in sending tax refunds.

The savings rate fell to 4% of disposable income in March, the lowest level since the 3.7% of June, 1983.

In a separate report today, the government said the nation’s industrial operating rate was flat in March after a decline the month before.

The Federal Reserve Board said the nation’s factories, mines and utilities operated at 80.8% of capacity in March, the same rate as in February.

Had Fallen in February

The operating rate had fallen 0.4 of a percentage point in February from a January rate of 81.2%.

The 80.8% operating rate is 0.1 of a percentage point lower than it was a year ago and almost 2 percentage points below the high point in this recovery of 82.7% reached last July.

The decline in consumer spending, the biggest since a 0.9% slide in February, 1984, was also the first setback since a 0.2% drop last October. It was reflected in last week’s announcement that retail sales fell 1.9% in March, the steepest decline in more than seven years.

The spending report was certain to raise further concerns about the durability of the recovery.