Consumer spending inches up in March

By Martin Crutsinger

AP Economics Writer

WASHINGTON

U.S. consumers boosted their spending by a tiny amount in March as purchases of nondurable goods such as clothing offset a big drop in spending on autos and other long-lasting items.

Spending edged up 0.1 percent last month after a 0.2 percent rise in February, the Commerce Department reported Friday. Incomes rose a solid 0.4 percent.

Consumer spending, which accounts for 70 percent of economic activity, has been lackluster for the past four months. The weakness played a big role in the first quarter when the economy expanded at a weak 0.5 percent rate, the slowest increase in two years.

But with job growth still solid, economists hope stronger spending in the months ahead will help the economy grow at faster levels.

A consumer price gauge closely watched by the Federal Reserve inched up a slight 0.1 percent in March. Excluding volatile food and energy, this price gauge is up 1.6 percent over the past 12 months. Inflation has been running below the Fed’s 2 percent target for almost four years.

At a meeting this week, the Fed decided to keep its key policy rate unchanged and gave no hint on when it might raise the rate again. Since it boosted the rate by a quarter-point in December, weakness in the U.S. and global economies have kept the central bank on the sidelines. Many economists believe the Fed will not raise rates again until the second half of this year.

The income and spending report showed that spending on durable goods fell 0.6 percent in March, reflecting a big drop in auto sales.

The overall economy, as measured by the gross domestic product, inched forward at an annual rate of just 0.5 percent in the first quarter, the slowest showing in two years. Much of the result reflected the weakness in consumer spending.

Economists believe overall growth will rebound to around 2 percent in the current quarter and then strengthen to around 2.5 percent for the second half of the year.