Consumer Spending Jumps in March

Even with a war on, Americans streamed to the shopping malls in March, boosting spending by the largest amount in three months.

The Commerce Department said Monday that consumers’ spending rose by 0.4% as fears of worst-case scenarios in Iraq dissipated with the onset of the war.

In February, spending had risen by a lackluster 0.1% after having fallen by 0.1% in January, reflecting harsh winter weather and plunging consumer confidence because of growing anxiety about the war.

Personal incomes also rose by 0.4% in March, double the February gain.

Analysts took the increases as a sign that the struggling economy could start seeing stronger growth now that the war is over.

“Given all the worries in March, the fact that consumers still spent money provides hopes that going forward we will see even more visits to the malls,” said Joel Naroff, chief economist at Naroff Economic Advisors.

But analysts also cautioned that any sustained rebound in incomes and spending will require an improvement in the nation’s job picture, which they said was still months off.

Many analysts are predicting that the jobless rate, at 5.8% in March, will increase to 5.9% or perhaps 6% when the April report is released Friday.

Lynn Reaser, chief economist at Banc of America Capital Management, said she was looking for the unemployment report to show 30,000 more jobs lost.

“Jobless claims suggest that companies are still laying off workers at a significant pace in April while only a few companies were hiring,” she said.

However, a drop of 30,000 jobs would be far below the 465,000 combined jobs lost in February and March.

The overall economy grew at a sluggish rate of 1.6% in the first three months of the year, but the more optimistic analysts say growth will strengthen to above 2% this quarter and 3% or more for the second half of the year.

Federal Reserve Chairman Alan Greenspan, one of those in the optimistic camp, is to testify Wednesday before Congress, an appearance that will be closely watched to see if he alters his tepid endorsement of further tax cuts to bolster growth.