THE ECONOMY : Income Up, but Spending Declines as Prices Increase

Americans’ saving rate rose to 5.8% of their disposable income in March as consumer spending failed to match the increase in personal income, the government reported Monday.

But analysts cited rising prices for the subdued spending and not consumer intent to increase their savings rate.

“For each of the months of the first quarter, we had very strong inflation that cut into purchasing power,” said David Berson, chief economist for the Federal National Mortgage Assn. “It’s likely to see that reverse itself in the second quarter.”

Stephen S. Roach, senior economist at Morgan Stanley & Co. in New York, agreed, saying inflation remains the “single biggest threat to the consumer support of this expansion” although he too expects it to moderate in the current quarter.

“That will enable consumers to continue to expand their capacity to spend,” he said.

Consumer spending is watched closely as a barometer of economic health because it accounts for about two-thirds of the nation’s economic activity. It has been in the forefront of the economic expansion now in its eighth year after the 1981-82 recession.

Consumer spending totaled a seasonally adjusted annual rate of $3.66 trillion, slowing to a 0.4% gain after a 0.6% advance in February, the Commerce Department reported. It was the lowest since a 0.3% increase in October.

The department said personal incomes grew 0.8% to a seasonally adjusted annual rate of $4.67 trillion on top of 0.8% jumps in January and February. The increases originally were reported to have been 0.7% in January and 0.9% in February.

“The March and February increases in personal income were boosted by increases in subsidy payments to farm proprietors,” the department said. “Excluding these payments, personal income increased $24.6 billion, or 0.5%, in March and $28.9 billion, or 0.6%, in February.”

Americans’ income after taxes rose 0.8% in March, the largest increase since a 0.9% gain in December, the department said.

The key component of the income category, wages and salaries, rose $14.1 billion at an annual rate after a $22-billion gain in February.

The increase in personal consumption, which includes everything except interest payments on debt, totaled $13.8 billion, down from $21.3 billion in February.