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Consumer Spending Enters Sharp Slowdown in March

Consumer spending grew just 0.3 percent in March, down from the 0.9 percent growth in February, the ""Labor Department"":http://www.dol.gov/ said Monday.


Economists had expected spending to be up 0.4 percent. At the same time, personal income grew 0.4 percent in March, Labor said, slightly faster than February's 0.3 percent growth and consensus expectation of 0.3 percent.

In dollars, income was up $50.3 billion, compared to $39.6 billion in February. Spending increased $32.3 billion, about one-third the $96.6 billion increases recorded for February.

Consumer spending for the quarter was up $68.1 billion according to last Friday's GDP report ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô also prepared by Labor ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô accounting for most of the $73.4 billion increase in GDP for the quarter. Consumer spending typically represents about 70.0 percent of that nation's GDP.

Personal savings as a percentage of disposable (after tax) income edged up to 3.8 percent in March from 3.7 percent in February; it had been 4.3 percent in January.


Despite continuing low interest rates, personal interest payments increased 1.4 percent in March to $161.4 billion from $159.2 billion in February, topping $160 billion for the first time since last September.

Wages and salaries rose $18.7 billion or 0.3 percent in March, BEA said, after increasing $24.8 billion or 0.4 percent in February and $30.4 billion in January. The March slowdown reflects the weaker labor market. Employers added 120,000 jobs in March, compared with an average of just over 200,000 in each of the prior two months.

Wage and salary growth accounted for 37.8 percent of the growth income in March, down from 62.3 percent in February. ""Transfer payments"" ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô various government programs including Social Security, Medicare, Medicaid, and unemployment insurance ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô represented about 23 percent 11 percent of the total increase. Unemployment insurance payments dropped for the third straight month.

The increase in spending was weighted to goods, which accounted 66.2 percent of the total compared with 53.4 percent in February, a good sign for manufacturing. Spending on durable goods fell $3.7 billion, hinting at a lingering unwillingness by consumers to make purchase which require borrowing.

The Personal Consumption Expenditure (PCE) Price Index ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô often considered the Federal Reserve's favored measure of inflation - increased 0.3 percent and is now 2.1 percent above its year ago level. In February, the Index rose 0.3 percent and the year-over-year increase was 2.3 percent.

Meanwhile, the Core PCE Index ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô excluding food and energy - rose 0.2 percent and is up 2.0 percent in the last year, compared with a 0.1 percent increase in February producing a 1.9 percent year-year increase.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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