US consumer spending rebounded 0.4 percent in March

WASHINGTON (AP) — Americans boosted their spending by 0.4 percent in March, the best showing in three months. Meanwhile, a key gauge of inflation closely watched by the Federal Reserve rose at the fastest pace in more than a year.

The March increase in consumer spending followed two months of very weak readings with no gain in February and only a 0.2 percent increase in January, the Commerce Department reported Monday. The result is an encouraging sign that economic growth, which slowed in the first quarter, will accelerate in the current quarter.

Personal incomes advanced a moderate 0.3 percent in March, matching the February gain.

Consumer spending is considered key to economic growth since it accounts for 70 percent of economic activity. The economy slowed to growth of 2.3 percent in the first quarter, reflecting a slowing in consumer spending. Many analysts believe stronger consumer spending this quarter will lift overall growth back to rates above 3 percent.

An inflation gauge tied to consumer spending advanced 1.9 percent in March compared to 12 months ago. That was the fastest pace since a similar 12-month gain of 1.9 percent in February 2017.

The Fed seeks to achieve moderate annual increases in inflation of around 2 percent but has fallen below that target for the past six years. Now with unemployment at a 17-year low of 4.1 percent, economists expect that tight labor markets will finally start to lift wage gains and overall inflation.