Spending on Services Up but Goods Lag
Consumer spending rose more than expected in March, led by outlays for services rather than goods, a government report showed Monday. Americans’ incomes also rose.
The 0.3% gain in spending in March followed a 0.2% increase in February, the Commerce Department said. Incomes rose 0.5%, the same as in February. The personal savings rate, while negative, edged up again from January’s record low.
Although Monday’s report showed consumers gave economic growth an added push as the first quarter drew to a close, the March numbers held little benefit for manufacturers. Outlays on durable goods such as automobiles and appliances fell, and expenditures for nondurable goods such as clothing were unchanged.
“Spending on services is moving ahead, but spending on goods is very sluggish,” said Carol Stone, an economist at Nomura Securities International in New York. “There is a little more boost going into the second quarter than we thought, but it’s in services.”
Manufacturing in the U.S. Midwest improved in April without pulling out of a slump that began in October, a private business survey found. The National Assn. of Purchasing Management-Chicago’s factory index rose to 38.9 from a 19-month low of 35 in March. Readings of less than 50 mean contraction. (See related story, C2)
The purchasing managers’ employment index, at 30.7 in April, was the lowest since 28 in October 1980. Manufacturing in the region is heavily influenced by demand for autos and steel.
The report “suggests there is at least some real and lingering severe weakness in manufacturing in some parts of the country,” said Ian Shepherdson, an economist at High Frequency Economics in Valhalla, N.Y.
Meanwhile, spending on durable goods fell 1.1% in March after a 1.6% increase in February. The change reflected a decline in outlays on autos and parts.
Auto sales fell 4.2% in March to a 17.1-million-vehicle annual rate. It was the slowest sales month so far this year, industry figures showed. Auto makers haven’t changed their sales forecasts of about 16 million vehicles this year, which means monthly figures probably will continue to shrink throughout the year.
Spending on nondurable goods such as clothing was unchanged in March after falling 0.5% in February. Spending on services, which make up more than half of the report, rose 0.7% after rising 0.2% in February.
Meantime, disposable income, or the money left over after taxes, rose 0.5% in March after rising 0.5% the previous month.
The personal savings rate improved to -0.8% during March from a -1% in February and a record -1.3% in January.
Inflation was tame in March. The personal consumption expenditures price index, a measure of inflation watched by the Fed, was unchanged after rising 0.3% in February.
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Personal Income
Seasonally adjusted annual rate, in trillions of dollars:
March: $8.59 billion
Source: Commerce Department
Personal Spending
Seasonally adjusted annual rate, in trillions of dollars:
March: $7.02 trillion
Source: Commerce Department
