NEW YORK (CNN/Money) - Consumer spending and personal income both rose modestly in the United States last month, the government said Monday, as a critical sector of the world's largest economy held its strength at the end of the first recession in a decade.
Personal spending rose 0.4 percent to $7.29 trillion after rising 0.6 percent in February, the Commerce Department said, while personal income rose 0.4 percent to $8.92 trillion after rising 0.6 percent in February. Economists surveyed by Briefing.com expected spending to rise 0.4 percent and income to rise 0.5 percent.
Disposable income, or income after taxes and government fees, rose 0.5 percent after rising 0.7 percent in February.
"It appears as if consumers have the money to continue spending at a very solid pace going forward," said Joel Naroff, chief economist and president of Naroff Economic Advisors in Holland, Pa.
Consumers saved 2.2 percent of their disposable income in March, the government said, the highest savings rate since 4.7 percent in September 2001 and up from a revised 1.9 percent in February. The savings rate does not include contributions to 401(k) plans, home equity, or other widespread methods of saving.
U.S. stock prices rose in midday trading, while Treasury bond prices fell.
Consumer spending is closely watched by policy makers since it fuels about two-thirds of the U.S. economy. Spending grew 3.5 percent in the first quarter after growing 6.1 percent in the fourth quarter of 2001.
To keep consumers spending despite a recession that probably began in March 2001, the Federal Reserve cut its target for short-term interest rates 11 times in 2001. But it decided at its first two policy meetings of 2002 to leave rates alone. The government reported Friday that gross domestic product grew at a 5.8 percent pace in the first quarter, proof the recession was over. GDP is the broadest measure of the nation's economy.
The recession was one of the shortest and mildest in history, thanks in part to resilient consumer spending. But continued spending will depend in part on the recovery of the labor market.
Unemployment rose in March to 5.7 percent and is expected to creep up to 6 percent this year, as businesses, suffering from a profit slump and skeptical about the recovery, might be reluctant to hire new workers for some time after cutting more than a million jobs in 2001.
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In the Commerce Department report, spending on durable goods such as cars and computers, which are meant to last three years or more, rose 0.5 percent last month after rising a revised 1.5 percent in February.
Spending on nondurable goods such as food and clothing rose 0.2 percent after gaining a revised 0.4 percent in February. Spending on services, the largest sector of the economy, rose 0.5 percent after rising 0.6 percent in February.
The personal consumption expenditures price index, an inflation measure closely watched by Fed policy makers, inched up 0.2 percent in March after rising 0.1 percent in February. The report was consistent with other recent data showing inflation is still tame, meaning the Fed might be in no great hurry to raise interest rates again, especially since the strength of the economy's recover is still in doubt.
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