Income Growth in March Tops Spending

U.S. consumers’ incomes rose in March at a faster pace than spending for the first time in five months, government figures showed Friday, adding to expectations that the Federal Reserve soon may take a more aggressive stance on interest rates.

The Commerce Department said spending rose 0.5% to a seasonally adjusted annual rate of $6.669 trillion in March, after an upwardly revised 1.4% increase in February--the largest gain since a 1.7% rise in February 1994.

Incomes rose a stronger 0.7% in March to $8.145 trillion, after February’s unrevised 0.4% increase.

March marked the first month that incomes rose faster than spending since October, overturning a trend of spending outstripping income gains. In recent months, Americans have dipped into stock market gains to finance a consumer spending spree that has spurred the economy’s red-hot growth.

March’s rise in spending was the lowest increase since a 0.4% gain in July of last year, but most economists saw the weaker rise as just a monthly fluctuation.

Spending in March was restrained by a 2.5% drop in spending on long-lasting durable goods, mainly caused by lower automobile sales, after a 3.3% gain in the previous month when car sales were unusually strong. Spending on nondurable goods and services posted solid gains in March.

With incomes outstripping spending, savings ticked higher to 0.4% of disposable income. That was marginally better than February’s saving rate of 0.2%, which was an all-time low.

Economists said the report added to the growing belief that the Fed may opt to raise interest rates by 50 basis points when it meets May 16 to set monetary policy.