Personal income rose less than expected in March while spending was flat, according to the Bureau of Economic Analysis.
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Personal income rises less than expected, inflation pulls back in March
On Friday, the advance report on first-quarter GDP showed that consumer spending rose just 0.3%, the lowest since Q4 2009.
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Personal income rose 0.2%, missing the forecast for 0.3% growth. Consumer spending was forecast to grow by 0.2%, according to Bloomberg.
Although spending on services — the largest sector of the economy — rose, this was partially offset by a drop in the auto industry.
On Friday, the advance report on first-quarter GDP showed that consumer spending rose just 0.3%, the lowest since Q4 2009. Lower spending on durable goods, especially vehicle and parts dealers, was a major contributor to the fall.
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"We do not think the weak Q1 consumer spending is cause for alarm," said Ward McCarthy, the chief financial economist at Jefferies, in a note. "First, PCE growth in the prior three quarters averaged an unsustainable 3.6% per quarter. Taking a breather after such a spending spree is not unreasonable."
Continued job growth and rising incomes should make the drop in Q1 spending an anomaly, McCarthy added.
The report also included data on personal consumption expenditures, a gauge of consumer purchases that the Fed prefers to measure inflation. The PCE deflator fell 0.2% month-on-month and rose 1.8% year-on-year, slipping from 2.1% in February, which was the first time it exceeded the Fed's 2% target in five years.
Excluding the volatile costs of food and energy, core PCE fell 0.1% month-on-month and pulled back to 1.6% year-on-year from 1.8%.
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