Consumers’ Incomes, Spending Rise in March
Boosted by farm subsidies, the incomes of Americans rose more strongly in March than they had in two months, and spending nearly kept pace.
The Commerce Department said Monday that overall income climbed 0.6% in March, up slightly from February’s increase, while spending rebounded from its first decline in nearly a year to rise 0.5%.
Analysts said the report suggests welcome moderate growth and is a sign that the consumer-driven economic expansion has not run out of steam.
“The consumer is still alive and well and certainly not going into a shell,” said economist Robert Dederick of Northern Trust Co. in Chicago. “The consumer isn’t shutting off the spending valve entirely. It’s encouraging as we head into the second quarter.”
Moreover, Americans are saving at a higher rate than they have in more than two years, and that could signal more spending ahead.
Income rose to $5.99 trillion in March, and spending reached $4.79 trillion.
In another report, the Commerce Department said weakness in the housing market sank March construction spending to its lowest level in four months. The figure dropped 0.4%, marking the first time it has fallen three straight months in nearly three years.
Also, the ability of the typical American family to buy an existing home dipped in the first quarter as mortgage rates hit a recent peak, the National Assn. of Realtors said.
In another sign of economic slowdown, the National Assn. of Purchasing Management said U.S. manufacturing grew modestly in April and price increases for materials eased considerably. The group’s closely watched index has advanced steadily over the last 20 months, but the rate of growth has slipped this year.
The government reported Friday that its broadest gauge of economic activity slowed dramatically in the first three months of 1995. Gross domestic product rose 2.8% at an annual rate, a little more than half as rapidly as the booming 5.1% rate in the fourth quarter of 1994.
On Monday, the Commerce Department revised its spending figure for February to show a drop of 0.2%, contrasted with a previously estimated rise of 0.1%. The February spending decline was the first since a 0.3% drop in April, 1994.
Consumer spending, which represents two-thirds of the nation’s economic activity, has tailed off since last year’s spree.
“We assume that second-quarter spending will be a bit stronger, but April was probably about flat,” economists for Merrill Lynch & Co. said in a statement.
Analysts credit the slowdown at least in part to the Federal Reserve Board, which raised interest rates seven times in the 12 months ended Feb. 1.
The March increase in personal income made it the fourth straight gain after being unchanged in November. The last time income rose more rapidly was in January, when it climbed 0.8%.
Farm subsidies in March and auto industry bonuses the month before helped inflate the total.
Private wages and salaries, the most closely watched component of income, increased just 0.2% in March and 0.4% in February.
Disposable income--income after taxes--climbed 0.6% in March after gaining 0.5% the previous month.
The combination of income and spending means that Americans’ savings rate--savings as a percentage of disposable income--rose to 5.5% in March from 5.4% the previous month. The savings rate was the highest it has been since December, 1992, when it was 8.3%.
The income and spending figures are not adjusted for inflation. When adjusted, disposable incomes and spending both rose 0.4% in March.
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Personal Income
Trillions of dollars, seasonally adjusted annual rate:
March 1995: $5.99
Source Commerce Department
Personal Spending
Trillions of dollars, seasonally adjusted annual rate:
March 1995: $4.79
Source Commerce Department
