Tuesday, April 29, 2003

Spending, income up for March

The Associated Press

WASHINGTON - Even with a war on, Americans streamed to the shopping malls in March, boosting spending by the largest amount in three months.

The Commerce Department said Monday that consumers' spending rose by 0.4 percent as fears of worst-case scenarios in Iraq dissipated with the onset of the war.

In February, spending had risen 0.1 percent after having fallen by 0.1 percent in January, reflecting harsh winter weather and plunging consumer confidence because of growing anxiety about the war.

Personal incomes also rose by 0.4 percent in March, double the February gain.

Analysts took the increases as a positive sign that the economy, which has been struggling for months, could start seeing stronger growth now that the war is over.

"Given all the worries in March, the fact that consumers still spent money provides hopes that going forward we will see even more visits to the malls," said Joel Naroff, chief economist of Naroff Economic Advisors.

But analysts also cautioned that any sustained rebound in incomes and spending will require an improvement in the nation's job picture, which they said was still some months off.

Many analysts are predicting the jobless rate, at 5.8 percent in March, will increase to 5.9 percent or perhaps 6 percent when the April report is released Friday.

Lynn Reaser, chief economist at Banc of America Capital Management, said she was looking for the unemployment report to show another 30,000 jobs lost.

"Jobless claims suggest that companies are still laying off workers at a significant pace in April while only a few companies were hiring," she said.

However, a drop of 30,000 jobs would be far below the 465,000 combined jobs lost in February and March.

Federal Reserve Chairman Alan Greenspan, one of those in the optimistic camp, is to testify before Congress on Wednesday, an appearance that will be closely watched to see if he moderates his view on the need for further tax cuts to bolster growth.

The Commerce Department report on incomes and spending showed that the jump in spending in March included gains in all categories. Spending on big-ticket durable goods, such as autos, posted a 1.5 percent gain following two straight months of declines.

Still, the increase was much more subdued once the impact of rising prices on purchases of gasoline and other items was removed. Adjusting for inflation, the March increase was 0.1 percent, while February was transformed from a gain of 0.1 percent to a decline of 0.4 percent.

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