Consumer spending jumps 1.1% in March
Consumer spending in the United States rose 1.1% in March, according to a Commerce Department press release on Friday, April 29. The increase in spending was led by higher cash spending on travel, meals, gasoline and food, although spending on durable goods fell for the second month in a row, led by a drop in purchases of vehicles.
Personal income – including salaries and government assistance – rose 0.5% month-on-month in March, while headline inflation jumped 0.9% from February and up 6.6% year-over-year when food and energy were included (up 5.2% without them), the Commerce Department announcement said.
“We think consumers will continue to shift more toward spending on services,” Kathy Bostjancic, chief U.S. economist at Oxford Economics, said in a Wall Street Journal report on Friday. She expects the recovery in consumer spending to be durable, “but obviously there are some big headwinds the consumer is facing right now,” such as inflation and supply chain disruptions.
Commerce Department data released Thursday (April 28th) showed inflation-adjusted consumer spending for the first quarter had risen on an empty stomach since last spring, with restaurant dining and health care leading the way. Consumers also spent more on services and durable goods, including cars in the first quarter.
Meanwhile, the U.S. unemployment rate was 3.6% in March and workers’ wages rose, but U.S. gross domestic product shrank at an annual rate of 1.4% in the first quarter of this year, according to the WSJ report, largely because of a growing trade deficit.
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Consumer spending in February rose at a slower pace of 0.2%, compared with a revised 2.7% increase in January, according to a March 31 report from the Commerce Department. Consumer spending accounts for more than two-thirds of US economic activity. Personal income rose 0.5% in February from January, which was largely flat.
Annual inflation, meanwhile, jumped to 6.4% in February, using the department’s personal consumption expenditure price index, which is the Federal Reserve’s preferred indicator.