US consumer spending continues to climb

United States consumer spending and personal income posted solid gains in March, with both notching their fourth consecutive monthly rise, the government said in a report that showed shoppers doing their part to help the economy recover.

Consumer spending rose 0.4% in March to an annualized rate of $7.29 trillion after a 0.6% gain in February, the Commerce Department said. Personal income also grew 0.4% in March to an $8.92-trillion pace after a 0.6% increase a month earlier.

The moderate rise in March consumer spending, which accounts for two-thirds of US economic activity, was good news for an economy in the early stages of emerging from a recession that set in a little more than a year ago.

Commerce said US gross domestic product (GDP) surged at a faster-than-expected 5.8% annual clip in the first three months of the year, with consumer spending growing at a 3.5% pace.

However, economists say that because consumers did not ratchet back sharply on spending during the recession, they are unlikely to give the economy much of a boost as it recovers.

Some warn that temporary factors which have lent strength to consumer spending recently, such as tax rebates, may combine with higher energy costs to dampen consumer outlays in coming months.

Much of the first quarter's GDP growth was due to a slower pace of inventory reduction by businesses rather than a rise in consumer and business demand.

In March, taxes took about the same bite out of consumer income as a month earlier, and disposable income rose 0.5%.

With that gain outstripping the rise in spending, the saving rate rose to 2.2% in March from 2.1% in February. A rising saving rate could help alleviate the concern of many economists that relatively high debt levels may lead consumers to reduce spending in the months ahead.

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