Consumer spending, incomes up in March

Recovery not stalling

A rise in consumer spending and higher personal income last month is helping to alleviate some of the worries that economic activity is slowing too quickly.

The government reported this morning that consumer spending increased 0.6% in March, while personal income gained 0.5%.  That follows an upward revision to February’s numbers, including a robust 0.9% rise in spending in February.

Inflation continued its upward March, as higher oil and food prices pushed up the PCE Price Index by 0.4%, matching February’s rise.  The core rate of inflation, however, slowed, increasing just 0.1% last month and held at 0.9% year-over-year.

Given the overall rise in inflation, real spending, which takes into account the change in prices, was up a modest 0.2% after moving ahead a respectable 0.5% in the prior month.

The savings rate held steady at 5.5%.

The improvement in income is being aided by increased employment, which in turn is helping to support consumer outlays and taking some of the sting out of higher gasoline prices.

Further, the upward revision to February seems likely to provide modest support to GDP when the figure is revised next month.

But weekly jobless claims have turned higher.  Assuming the disquieting upward shift in claims is not coming from statistical noise that seasonal adjustments are failing to capture, it does seem appear the economy is slowing somewhat.

We’ll get more when the ISM service and manufacturing reports are released next week.

Still, March’s rise in spending suggests the recovery is not stalling out.