US household income on the rise

US household income rose in March by the most in three months but consumers put away part of the extra cash and only modestly increased spending, suggesting economic growth ended the first quarter on a soft note.

The Commerce Department said consumer income rose 0.4 per cent last month. Analysts had expected a gain of 0.3 per cent. After-tax income climbed 0.2 per cent in March when accounting for higher prices.

Consumer spending rose 0.3 per cent last month, also just below the median forecast in a Reuters poll of 0.4 per cent.

When taking into account inflation, which has been fed in recent months by higher gasoline prices, spending was up 0.1 per cent."

The spending number is an indication that the higher gas prices we saw last month are taking their toll," said Todd Schoenberger, managing principal at the Black Bay Group in New York.

US economic growth cooled in the first quarter as businesses cut back on investment and restocked shelves at a slower pace. The economy grew at an annualised pace of 2.2 per cent in the first three months of the year, data on Friday showed, a slowdown from the fourth quarter's 3.0 per cent rate.

Stronger consumer spending over the entire quarter cushioned the blow, but today's data suggested consumers ended the quarter spending less freely.

With consumption rising less quickly than income, the saving rate edged higher to 3.8 per cent.
Prices for US government debt held steady at higher levels, while US stock index futures were slightly lower.

A price index for personal spending rose 0.2 per cent in March. In the 12 months through March, the PCE index was up 2.1 per cent, the lowest in a year but still just above the US Federal Reserve's target of 2 per cent.

Another measure of prices suggested some build-up of inflationary pressure, however. The core PCE index, which strips out volatile food and energy prices and is often read as a measure of inflation trends, rose 2.0 per cent in March from a year earlier, the biggest year-on-year rise since November 2008.

Reuters