WASHINGTON — Americans spent less than expected in March, pulling back after a burst of buying in the first two months of the year. The reversal was tied to a larger-than-anticipated decline in income and is a stark reminder of a fragile economy trying to rise out of a deep recession.
The Commerce Department data released Thursday highlighted one of the big wild cards for the economy: consumers’ appetite to spend in the months ahead.
The outcome will be determined in part by how much the tax rebates in President Barack Obama’s economic-stimulus package and historically low mortgage rates mitigate the financial pain caused by rising unemployment and falling home values.
Consumer spending fell 0.2 percent in March, ending an otherwise strong quarter for spending on a sour note. Americans’ incomes — the fuel for future spending — tumbled 0.3 percent for the month, reflecting wage cuts and layoffs as employers cut costs. Both the income and spending figures were weaker than economists had expected.
“Consumption fell in March, but let’s not panic a whole lot,” said Joel Naroff, president of Naroff Economic Advisors. “The modest drop-off in spending does not change the fact that individuals are starting to buy more things and are attempting to live their lives a little more normally.”
Consumer spending grew at an annualized rate of 2.2 percent in the first quarter, the government said Wednesday in reporting on the nation’s gross domestic product.
In one encouraging sign, the number of newly laid-off workers filing for jobless benefits dropped last week.
The Labor Department reported that new applications for unemployment insurance fell to a seasonally adjusted 631,000, from 645,000. Economists had expected a small increase.
The four-week moving average of initial jobless claims, which smooths out volatility, dropped last week to 637,250. That was the lowest level since late February.
