U.S. consumer spending rebounded in March while the Federal Reserve's preferred underlying inflation gauge eased to a one-year low, reinforcing the central bank's patient stance on interest rates even as the economy's main engine holds up.
Purchases, which make up more than two-thirds of the economy, rose 0.9% in March from the prior month, topping estimates with the best gain in almost a decade, after a 0.1% February increase, according to a Commerce Department report Monday that combined two months after delays related to the government shutdown. Personal income rose 0.1% in March, less than forecast.
Excluding food and energy, the Fed's preferred core-price gauge was little changed from the previous month, compared with estimates for a 0.1% gain. The measure was up 1.6% from a year earlier, the slowest since January 2018 and missing projections. The broader personal consumption expenditures price index rose 0.2% in March from the previous month and climbed 1.5% from a year earlier, also below forecasts.
The signs of consumer strength follow Friday's gross domestic product report showing consumer spending, the largest chunk of the economy, cooled in the first quarter to a 1.2% pace of gains. That was offset by boosts from inventories and trade that helped economic growth accelerate to a 3.2% annualized rate.
The below-forecast price data Monday showed inflation still below the Fed's 2% goal despite low unemployment and what most economists see as above-average growth. Monday's Commerce Department release included personal spending data for both February and March. The earlier data were delayed because of the federal government shutdown that ended in January. The latest figures reflect a monthly breakdown of data already included in Friday's GDP report.
While the main personal-income figure missed forecasts, wage and salary gains remained solid with a 0.4% monthly rise in March following a 0.3% increase in February. Lower interest income and farm payments dragged down the headline number, the Commerce Department said.