U.S. consumer spending slows in March

Americans increased their spending more slowly in March, suggesting some are worried that their paychecks aren't growing fast enough.

The Commerce Department said Monday that consumer spending increased just 0.3 percent in March after a 0.9 percent gain in February.

Income grew 0.4 percent following a 0.3 percent gain in February. But after-tax income when adjusted for inflation increased just 0.2 percent in March. The gain followed two months of declines.

Consumer spending, which accounts for 70 percent of the economy, rose 2.9 percent in the January-March quarter -- the fastest pace in more than a year. The increase was a bright spot in an otherwise weak first quarter for economic growth.

But Paul Dales, senior U.S. economist at Capital Economics, noted that stronger spending in January and February drove the quarterly increase. And consumers spent more while saving less, which suggests they cannot sustain their spending pace without better pay.

"Real incomes will need to grow at a faster rate to prevent consumption growth from slowing," said Dales. He noted that Friday's report on April hiring will be a crucial sign of where the economy is headed.

A healthy job market could reinvigorate consumers. Economists predict employers added 163,000 jobs in April, slightly better than March's figures but below the pace from December through February.

One positive change since the winter: Gas prices appear to have peaked. That would give consumers more to spend elsewhere. After-tax income rose just 0.6 percent in the first three months compared with a year earlier. That was the smallest pay increase in two years.

The government reported Friday that the overall economy grew at an annual rate of 2.2 percent in the January-March quarter. -- AP