Washington, DC, May 1, 2006--Personal incomes and consumer spending rose more than expected in March, according to a report from the Commerce Department.
Personal incomes increased 0.8% in March, the biggest gain since September, after rising 0.3% in February. However, the incomes gains were offset by a 0.4% rise in consumer prices.
Consumer prices rose 0.4% in March after rising 0.1% in February, as measured by the personal consumption expenditure index. Core prices rose 0.3%, the biggest gain since October.
Core inflation is up 2% in the past 12 months, at the top of the Fed's comfort zone. Fed officials have said they believe inflation will be contained by the lagged impacts of its 15 interest rate increases in the past 22 months, but remain vigilant.
Consumer spending increased 0.6% in nominal terms in March after rising 0.2% in February. Economists expected a gain of 0.4%. Real consumer spending (adjusted for inflation) rose 0.2%, the same gain as in February.
The personal savings rate improved to negative 0.3% from negative 0.6% in February. The savings rate has not been positive since March 2005.
Wages and salary income increased 0.5% in March, the same as in February.
Proprietors' income rose 0.7%, the best gain since November. Income on assets increased 0.2%. Transfer payments, such as government payments, increased 3.3% on the implementation of the Medicare drug plan.
Real spending on durable goods rose 0.6% in March after falling 1.7% in February. Real spending on nondurable goods fell 0.4% after falling 0.2% in February. Real spending on services increased 0.4% after rising 0.7%.
