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US consumer spending surged 0.9% in March, the biggest gainer in about 10 years, as inflation pressures remain non-existent.
The March gain was the biggest monthly increase since August 2009, the Commerce Department reported Monday. That is a big improvement after 3 months of lackluster readings in this Key segment of the economy. Consumer spending accounts for over 70% of economic activity.
Incomes grew 0.1% in March while inflation rose just 0.2% and has risen only 1.5% over the past 12 months, far below the Fed 2% target for inflation.
The spike in consumer spending is encouraging because it suggests that the overall economy had solid momentum going into Q-2.
The government reported Friday that the economy, as measured by the gross domestic product, grew at a surprisingly strong 3.2%, helped by the March surge in consumer spending.
The 0.9% March spike in spending followed a sharp 0.6% drop in December and small gains of 0.3% in January and 0.1% in February. The slight 0.1% rise in incomes in March followed a modest 0.2% rise in February and a 0.1% decline in January.
With the big rise in spending and the increase in incomes, the household saving rate fell to 6.5% of after-tax income in March, the lowest level since November when it was 6.2%.
The 1.5% Y-Y increase in consumer prices was up from a 1.3% 12-month gain in February but still well below the Fed’s target.
The absence of inflation pressures was a Key reason that the Fed did an about-face in January, and announced that after boosting its benchmark interest rate 4X in Y 2018, it planned to be “patient” and expected that it would not raise rates at all in Y 2019.
That change has helped drive a big rally in the stock market as investors stopped worrying that the Fed was in danger of over-doing its credit tightening campaign and might drive the economy into a recession.
The Trump Policies are working.
Making and Keeping America Great!
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