Posted on: Saturday, May 1, 2004

Spending drives March growth

By Jeannine Aversa
Associated Press

WASHINGTON — Consumers, an important force in the economic recovery, spent modestly in March, helping the economy log solid growth in the last quarter.

The Commerce Department reported yesterday that consumers boosted their spending by 0.4 percent, after a 0.4 percent increase in February, according to revised figures. February's increase was double the 0.2 percent advance reported a month ago.

Americans' incomes, meanwhile, also rose solidly in March, by 0.4 percent, after a 0.5 percent gain in February. Income growth is a main factor in people's willingness to spend in the future, economists say.

"With the March rise in personal income, there is a solid base of ready cash to fuel spending increases," said Ken Mayland, president of ClearView Economics.

The income and spending figures are not adjusted for inflation.

Consumer spending accounts for roughly two-thirds of economic activity in the United States and plays a major role in the strength of the economy's recovery.

The March rise in consumer spending didn't hit the 0.7 percent increase forecast by economists, but it did match analysts' expectations.

The economy grew at a solid 4.2 percent annual rate in the January-March quarter, a slight improvement from the 4.1 percent growth rate in the previous quarter, the government reported Thursday.

Consumer spending for the quarter grew at a 3.8 percent annual rate, up from a 3.2 percent pace in the fourth quarter.