By Jason Lange
WASHINGTON, April 30 (Reuters) - U.S. household income rose in March by the most in three months but consumers socked away part of the extra cash and only modestly increased spending, suggesting economic growth ended the first quarter on a soft note.
The Commerce Department said on Monday consumer income rose 0.4 percent last month. Analysts had expected a gain of 0.3 percent. After-tax income climbed 0.2 percent in March when accounting for higher prices.
Consumer spending rose 0.3 percent last month, also just below the median forecast in a Reuters poll of 0.4 percent.
When taking into account inflation, which has been fed in recent months by higher gasoline prices, spending was up 0.1 percent.
“The spending number is an indication that the higher gas prices we saw last month are taking their toll,” said Todd Schoenberger, managing principal at the Black Bay Group in New York.
U.S. economic growth cooled in the first quarter as businesses cut back on investment and restocked shelves at a slower pace. The economy grew at an annualized pace of 2.2 percent in the first three months of the year, data on Friday showed, a slowdown from the fourth quarter’s 3.0 percent rate.
Stronger consumer spending over the entire quarter cushioned the blow, but Monday’s data suggested consumers ended the quarter spending less freely.
With consumption rising less quickly than income, the saving rate edged higher to 3.8 percent.
Prices for U.S. government debt held steady at higher levels, while U.S. stock index futures were slightly lower.
A price index for personal spending rose 0.2 percent in March. In the 12 months through March, the PCE index was up 2.1 percent, the lowest in a year but still just above the U.S. Federal Reserve’s target of 2 percent.
Another measure of prices suggested some build-up of inflationary pressure, however. The core PCE index, which strips out volatile food and energy prices and is often read as a measure of inflation trends, rose 2.0 percent in March from a year earlier, the biggest year-on-year rise since November 2008.