Consumer Spending Slumps Despite Income Gains

Consumer spending rose at the slowest rate in five months in March, even though personal incomes posted a solid gain.

The Commerce Department reported that consumer spending on all items was up 0.3 percent last month, the slowest increase since a similar rise in October. Incomes rose by 0.7 percent, the fourth straight solid month of income growth.

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The spending performance was even weaker when the effects of higher gasoline prices were removed. After adjusting for price increases, consumer spending actually fell by 0.2 percent in March, the poorest showing since the fall of 2005 when the economy was suffering the aftershocks of Hurricane Katrina.

The weaker-than-expected performance in consumer spending was certain to add to worries that the economy could be in danger of stalling out if consumer confidence falters in the face or rising gasoline prices and a slumping housing market.

The government reported last Friday that the overall economy, as measured by the gross domestic product, slowed to an anemic pace of just 1.3 percent in the January-to-March quarter, the slowest performance in four years.

The report Monday showed that a price gauge tied to consumer spending was unchanged in March, after excluding the effects of gasoline and food.

This meant that core inflation as measured by personal consumption spending is up by just 2.1 percent for the past 12 months, much better than the worrisome 2.4 percent jump recorded for the 12 months ending in February.

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