Continued Spending Softens Recovery, Analysts Say

Consumer spending helped moderate the recession, but it also takes some of the zing out of the recovery, news reports said Monday.

Truckers watch economic indicators, like spending, because the business is extremely sensitive to fluctuations in the economy.

The Commerce Department said both spending and personal incomes rose by 0.4% in March, following twin gains of 0.6% in February.

Since consumer spending accounts for for two-thirds of all economic activity, the fact that consumers continued to buy during the recession preventing a deeper trough, the Associated Press said.

However, the continuation of spending throughout the period also means there is less pent-up demand, AP said, and, thus, no boost to the economy by a slight increase.

Reuters said that, because consumers did not ratchet back sharply on their spending during the recession as they often do during downturns, they are unlikely to give the economy much of a boost as it recovers.

The gains in both spending and income matched the expectations of economists polled by Reuters

The AP said economists believe the ultimate shape of the recovery will be determined by the size of a turnaround in business investment spending, which has dropped.

Spending on durables, such as cars and appliances, rose 0.5%in March, while nondurable goods, such as food and clothing, spending edged up 0.2%, compared with a 0.4% increase the month before. Spending on services rose 0.5%, slightly less than the 0.6% increase in February.

The report also showed that disposable incomes — income after taxes — went up 0.5% in March, after a 0.7% gain.

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