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U.S. consumer spending unchanged in March; inflation subsides

News 01 May 2017
U.S. consumer spending unchanged in March; inflation subsides

FILE PHOTO: An H&M store has sale signs in the window in New York City, U.S., August 11, 2016. REUTERS/Joe White

WASHINGTON U.S. consumer spending was unchanged in March for a second straight month and the overall monthly inflation rate fell for the first time in a year,confirming the weak domestic demand in the first quarter.

But when adjusted for inflation consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.3 percent, ending two straight months of decline,the Commerce Department said on Monday.

Economists polled by Reuters had forecast consumer spending,rising 0.2 percent. The data was included in last Friday's first-quarter gross domestic product report, which showed consumer spending increasing at a 0.3 percent annual rate – the slowest since the fourth quarter of 2009.

The economy grew at a 0.7 percent pace in the first quarter,the worst performance in three years.

March's increase in real consumer spending sets it up for an acceleration in the second quarter. Consumption is likely to be supported by a pick-up in wage growth. A report on Friday showed private wages recorded their biggest increase in 10 years in the first quarter.

Spending in the first-quarter was constrained by a mild winter, which undercut demand for heating and utilities production. Delays by the government issuing income tax refunds as part of efforts to combat fraud also weighed on consumer spending as did rising inflation pressures.

The personal consumption expenditures (PCE) price index fell 0.2 percent in March, the first decline since February 2016 and the biggest drop since January 2015.

In the 12 months through March the PCE price index increased 1.8 percent after rising 2.1 percent in February.

Excluding food and energy, the so-called core PCE price index slipped 0.1 percent, the first and largest drop since September 2001, after increasing 0.2 percent in February.

In the 12 months through March, the core PCE price index increased 1.6 percent after advancing 1.8 percent in February.

The core PCE is the Federal Reserve's preferred inflation measure.

The U.S. central bank has a 2 percent target.

Personal income gained 0.2 percent last month after rising 0.3 percent in February.

Income at the disposal of households after accounting for inflation increased 0.5 percent, the biggest gain since December 2015. Savings increased to $849.1 billion from $819.0 billion in February.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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