The report shows monthly details hidden in the quarterly gross domestic product data released Wednesday which showed the economy slowing to a 0.1% annual pace in the first quarter, the slowest in three years, despite strong consumer spending.The housing sector may or may not be better off after a slow start to 2014.
The March data showed consumer income and their spending picked up. In current dollar terms, incomes rose 0.5%, while spending increased 0.9%.This was the strongest gain in income since last August.Wall Street economists had expected a 0.5% gain in income and a 0.7% increase in spending in March.After adjusting for inflation of 0.2%, after-tax incomes rose 0.3% in March and real spending increased 0.7%.It was the biggest gain for real disposable incomes since last September and the largest increase in real consumption since August 2009.
Reversing recent weakness, real spending on durable goods rose 2.7% in March, the largest gain since March 2010. Real spending on nondurable goods increased 0.9%, and real spending on services rose 0.4%.
The broadening in spending beyond health-care and utility during the second half of the [first] quarter suggests that consumers spending during this period made up for the sluggish performance earlier this year, when the unseasonably cold winter weather tempered spending activity.Wages rose 0.6% in March, the strongest gain since last November.
The personal consumption expenditure index, which Federal Reserve officials say is a more accurate gauge of inflation than the better-known consumer price index, rose 0.2% on the month. In the past year, the PCE price index has risen 1.1%, above the 0.9% gain in February but still well below the Fed’s target of a 2% rate.The core PCE rate was also up 0.2% in March and is up 1.2% year-on-year.
With spending rising faster than income, the personal savings rate fell to 3.8% from 4.2%. The level of savings was the lowest since January 2013.