Consumer spending in the U.S. climbed in March as Americans spent more on food and fuel, indicating further income gains are needed to boost the biggest part of the economy.
Purchases rose 0.6 percent after a revised 0.9 percent gain the prior month that was higher than previously estimated, Commerce Department figures showed today in Washington. The increase compared with the 0.5 percent median estimate of economists surveyed by Bloomberg News. Incomes climbed 0.5 percent, more than projected.
Federal Reserve Chairman Ben Bernanke signaled this week that the central bank would maintain record monetary stimulus after ending large-scale bond purchases in June, as part of an effort to bolster the expansion. Even with job gains and rising incomes, further gains in food and energy costs pose a risk to growth.
“The higher food and energy prices function like a tax in the short term, and discretionary spending is going to bear the brunt of that,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “Anything that increases consumer income will increase consumer spending, be that more jobs or higher wages. We do expect the rebound in the labor market to continue.”
Estimates from 69 economists surveyed by Bloomberg ranged from spending gains of 0.2 percent to 1 percent after a previously reported 0.7 percent gain the prior month.
Economists forecast incomes would rise 0.4 percent, according to the Bloomberg survey. The Commerce Department revised February’s reading to 0.4 percent from a previously reported 0.3 percent.
Stock-index futures maintained gains after the report. The contract on the Standard & Poor’s 500 Index expiring in June climbed 0.2 percent to 1,357.4 at 8:34 a.m. in New York. Treasuries rose, pushing down the yield on the benchmark 10-year note to 3.30 percent from 3.31 percent late yesterday.
Wages and salaries increased 0.3 percent in March after gaining 0.4 percent a month earlier.
Disposable incomes, or the money left over after taxes, rose 0.1 percent after adjusting for inflation, following no change in February, a reminder of the challenge represented by rising food and energy costs. The savings rate held at 5.5 percent.
Today’s report also showed inflation has picked up from a year ago. The gauge tied to spending patterns increased 1.8 percent from March 2010, following a 1.6 percent gain in the 12 months ended in February.
The Fed’s preferred price measure, the so-called core inflation reading that excludes food and fuel, rose 0.9 percent in March from a year earlier, matching the 12-month gain in February.
Today’s report showed that spending adjusted for inflation, which are the figures used to calculate gross domestic product, rose 0.2 percent after a 0.5 percent gain in February.
Retailers posted unexpected sales gains last month after rising U.S. employment prompted shoppers to spend more at chains including Costco Wholesale Corp., Saks Inc. and Limited Brands Inc.’s Victoria’s Secret.
Same-store sales at Victoria’s Secret rose 19 percent, more than 10 times the rate predicted by estimates compiled by Retail Metrics Inc. Industrywide, retailers posted a jump of 2.2 percent, compared with the average projection for a 0.5 percent drop.
The economy began 2011 on a weaker note, expanding at a 1.8 percent annual rate in the first quarter after a 3.1 percent gain in the final three months of 2010, Commerce Department figures showed yesterday. Consumer purchases rose at a 2.7 percent pace, more than forecast, following a 4 percent gain the previous quarter.
Americans may find it difficult to boost their spending as they pay more for groceries and gas. Regular fuel was $3.89 a gallon on April 27, the highest since August 2008, according to AAA, the nation’s biggest motoring organization. Food costs rose 0.8 percent last month, the most since July 2008, consumer-price index data from the Labor Department showed on April 15.
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