Strong gains in consumer spending and incomes in March

U.S. consumer spending rebounded sharply in March while incomes soared, reflecting billions of dollars in government support payments aimed at putting the country firmly on the road to recovery. PHOTO CREDIT: Robert F. Bukaty

WASHINGTON — U.S. consumer spending rose at the fastest pace in nine months while incomes soared by a record amount in March, reflecting billions of dollars in government support payments aimed at putting the country firmly on the road to recovery.

Consumer spending rose 4.2% last month, the Commerce Department said today, the best showing since a 6.5% spending increase in June. Spending had fallen 1% in February as frigid winter weather disrupted sales.

Incomes surged by a record-breaking 21.1% in March after having fallen 7% in February. The big gain reflected delivery of billions of dollars in relief payments with individual payments of up to $1,400 from the $1.9 trillion support package President Joe Biden pushed through Congress last month.

The strong gains provided more evidence that the economy is poised for a robust recovery following last year’s pandemic-triggered recession. Economists are counting on strong consumer spending, which accounts for two-thirds of economic activity, to power a recovery this year, helped by trillions of dollars in government support, increased vaccinations which are encouraging more people to leave their homes and a surge in pent-up consumer demand.

The government reported Thursday that the overall economy, as measured by the gross domestic product,, rose at a robust annual rate of 6.4% in the January-March quarter. Many analysts believe that growth in the current April-June quarter will be even stronger, perhaps topping 10%.

Friday’s report showed that inflation rose 2.3% in March compared to the same month a year ago but excluding volatile food and energy, the gain was a lower 1.8%.

The Fed at this week’s meeting kept its key interest rate at a record low of 0% to 0.25 percent and Fed Chairman Jerome Powell said the central bank will not be concerned by what it expects will be a temporary blip in inflation this spring.