Consumer Spending, Personal Incomes Post Increases in March

WASHINGTON – Americans flocked to the shopping malls in March, boosting spending by 0.4 percent, the best gain this year, as consumers started to shake off their worries about the Iraq war.

The Commerce Department said the March increase in spending followed a lackluster 0.1 percent gain in February and a decline of 0.1 percent in January. It marked the strongest monthly increase since a 1.1 percent surge last December.

Americans also saw their incomes increase at a more rapid pace during the month, rising by 0.4 percent, double the 0.2 percent increase of February.

The country has been struggling to mount a sustainable rebound from that downturn, but late last year the economy hit a wall as business and consumer confidence plunged amid fears about the impact of a U.S. invasion of Iraq on the U.S. and global economies.

However, with the worst-case scenario of disrupted oil supplies and terrorist attacks not occurring, Americans' confidence has begun to improve. The University of Michigan reported Friday that its survey of consumer confidence rebounded to 86.0 in April after three consecutive months of declines.

The overall economy grew at a sluggish rate of just 1.6 percent in the first three months of this year. Federal Reserve Chairman Alan Greenspan and other economists have forecast that growth should now improve as consumer and business confidence rebounds with the end of the war. Greenspan is scheduled to reveal his latest thoughts on the economy Wednesday in testimony before the House Financial Services Committee.

The Bush administration says a sustained economic rebound is not a sure thing and Congress needs to pass another round of tax cuts to end what so far has been a jobless recovery, just like the one that plagued Bush's father after the 1990-91 recession.

The Commerce Department report on incomes and spending showed that the 0.4 percent jump in spending in March came from strength in spending on nondurable goods, such as clothing and food, and on services such as rent payments. Spending on big-ticket durable goods such as cars was actually down for the month.

The 0.4 percent rise in consumer spending was much more subdued once the impact of rising prices on the purchases of gasoline and other items was removed. Adjusting for inflation, the March increase was a tiny 0.1 percent, while February was transformed from a gain of 0.1 percent to a decline of 0.4 percent.

Americans' disposable income, the amount left over after taxes are paid, rose by 0.3 percent in March, following a 0.2 percent increase in February.

Americans' savings rate dipped to 3.6 percent in March, down slightly from a 3.7 percent level in February.