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.
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.
The additional money goes further because of low inflation, which has been caused by falling oil prices.
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.
Fed officials held the rate steady at between 0.25% and 0.5% after their latest policymaking meeting on Wednesday.
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