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Consumer spending growth slows despite jump in income

Consumer spending
Shoppers leave the L.L. Bean retail store in Freeport, Maine, on March 16.
(Robert F. Bukaty / Associated Press)

Americans were hesitant to open their wallets last month despite swelling incomes, with  spending growth slowing in a sign of the economy’s weak start to the year.

Consumer spending rose just 0.1% in March, down from an upwardly revised 0.2% increase the previous month, the Commerce Department said Friday. The latest figure was below economists’ forecasts.

But personal income increased more than expected. Incomes rose 0.4% last month, up from a downwardly revised 0.1% gain in February.

Consumers opted to save more of their higher income instead of spend it amid concerns about the U.S. economy.

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The percentage of disposable income saved increased to 5.4% last month, the highest rate in more than a year.

Consumer spending accounts for about two-thirds of U.S. economic activity, and the March data are in line with Thursday’s government report of weak 0.5% economic growth in the first three months of the year.

But the labor market has continued to strengthen. That’s reflected in solid income growth so far this year.

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The additional money goes further because of low inflation, which has been caused by falling oil prices.

But inflation increased last month. A key price index also released Friday rose 0.1% after a 0.1% drop in February.

Still, prices increased just 0.8% during the 12 months ended March 31, well below the Federal Reserve’s 2% annual target. Excluding volatile energy and food prices, prices increased 1.6% for the same period.

Low inflation combined with weak economic growth has led Fed policymakers to delay increasing a key short-term interest rate.

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Fed officials held the rate steady at between 0.25% and 0.5% after their latest policymaking meeting on Wednesday.

jim.puzzanghera@latimes.com

Follow @JimPuzzanghera on Twitter

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