Consumer spending in US climbed in March as incomes rose

April 30 (Bloomberg) -- Consumer spending in the U.S. climbed in March after the biggest gain since August 2009, and incomes picked up, indicating the biggest part of the economy will help sustain the expansion.

Household purchases, which account for about 70% of the economy, increased 0.3%, after a revised 0.9% gain the prior month that was stronger than first reported, Commerce Department figures showed today in Washington. The median estimate of 72 economists surveyed by Bloomberg News called for a 0.4% rise. Incomes advanced 0.4%, the most in three months, and the savings rate rose.

A job market that’s on the mend and warmer weather underpinned household purchases, which grew in the first quarter by the most in more than a year as sales climbed at car dealerships and retailers like Target Corp. A pickup in hiring and wages is needed to maintain this quarter’s pace of spending.

“This report sets up fairly well for the second quarter,” said Peter Newland, a U.S. economist at Barclays Capital Inc. in New York. “What was encouraging was that the income numbers improved. Our expectation is that job growth does increase gradually” this quarter, he said.

Projections for spending ranged from increases of 0.2% to 1.2%. The February reading was revised from a gain of 0.8%.

Stock-index futures held losses after the figures as data showed Spain entered in to a recession. The contract on the Standard & Poor’s 500 Index expiring in June fell 0.2% to 1,395.5 at 8:47 a.m. in New York.

February Income

The increase in March incomes followed a 0.3% gain the prior month that was revised higher. Last month’s increase matched the median forecast in the Bloomberg survey.

Wages and salaries climbed 0.3% after 0.4% gains in the prior three months.

Disposable income, or the money left over after taxes, climbed 0.2 after adjusting for inflation, the first gain this year.

Spending adjusted for inflation, the figures used to calculate gross domestic product, rose 0.1% after a 0.5% increase. Purchases of durable goods fell 0.2% March after a 2.1% surge in February. Services spending was little changed after a 0.4% gain.

Saving Rate

The saving rate increased to 3.8% from 3.7%.

Household spending rose 2.9% from January through March, Commerce Department data showed on April 27. Gross domestic product climbed at a 2.2% annual rate, less than projected and following a 3% pace the prior quarter.

The report was a reminder of the concerns of Federal Reserve officials, who last week said growth will be “moderate” as unemployment remains “elevated.”

The central bank “expects economic growth to remain moderate over coming quarters and then to pick up gradually,” policy makers said in an April 25 statement. They repeated a plan to hold borrowing costs low through 2014 to spur growth.

Employers increased payrolls by 635,000 from January through March, the biggest quarterly gain since the first three months of 2006.

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