Consumer spending grew, but more slowly, in March. Durable goods purchases… (Victor J. Blue / Bloomberg )
Though American paychecks are growing at their fastest rate this year and gas prices are falling, consumers are scaling back their spending.
Personal incomes picked up 0.4% in March, or $50.3 billion, after a 0.3% rise the month before, according to the Commerce Department. That expansion -- the 28th consecutive monthly rise -- was better than economists had expected.
Disposable income was also up 0.4% in the largest gain so far this year. After tax and inflation adjustments, the growth narrowed to 0.2%, but it was still 2012’s first increase.
But Americans are still casting a cautious eye on the economy. Many recent indicators hint at a wavering, but ongoing recovery. Gas prices seem to be dropping and home values appear to be bottoming. The Federal Reserve last week predicted a drop in unemployment and moderate growth by the end of the year.
The fragile sense of optimism (and continued warm weather) helped push household purchases up 0.3% last month – a $29.6 billion boost. That, however, was a significantly less free-wheeling run-up compared to February’s 0.9% gain, which boosted spending by $93.7 billion.
Through the full first quarter, however, consumer spending is up 2.9% in its fastest expansion in more than a year -- a good sign for a measure that makes up roughly 70% of the country’s economic activity.
Consumers were less interested in appliances and other durable goods designed to last for years, with the exception of strong auto sales. Instead, they clamored for more transitory items such as clothing.
They also saved more, with the national savings rate inching up to 3.8% in March from 3.7%.
Said Deputy Commerce Secretary Rebecca Blank of Monday’s report: “While the data are encouraging, we must continue to do everything possible to support American businesses and create jobs as we continue to heal from the worst recession since the Great Depression.”
Fed forecasts drop in jobless rate, moderate growth
Irvine the most fashionable city in America, says report
GDP: U.S. economy expands at lackluster 2.2% rate in 1st quarter
Follow Tiffany Hsu on Twitter and Google+