Don’t look at the personal income report that comes out Monday if you hope to find good news. Personal income probably increased modestly in March, economists surveyed by Bloomberg estimate, and consumer spending remained flat.
The economists expect personal income to increase 0.4 percent in March, down from a 1.1 percent increase a month before. Consumer spending probably gained 0.1 percent, they said — much less than in February, when the increase in consumer spending was the highest in five months.
This comes as no surprise to the economists.
“I don’t think we’re going to see the number that is going to knock anybody’s socks off,” said Greg McBride, chief economist at Bankrate.com, speaking about the personal income data that the Commerce Department will release Monday.
Consumer confidence, a closely watched indicator among economists, fell in April to a three-month low after a sharp increase in March, “partly because Americans became worried that the pace of economic growth is slowing down after a good start at the beginning of the year,” said McBride.
The range of economic data – from retail sales to manufacturing to the number of new jobs – declined significantly in March, indicating that the optimism economists in the first quarter of 2013 was premature.
The economy accelerated at an annual rate of 2.5 percent from January through March, rebounding from an anemic growth rate of 0.4 percent in the last quarter of 2012, according to the Commerce Department.
“The acceleration in the first quarter of 2013 was breathing a sigh of relief that the fiscal cliff was averted,” said McBride.
The economy is repeating the scenario of the last two years, when a good start in the first quarter slowed down in spring. The expiration of the 2 percent payroll holiday in January and the automatic across-the-board spending cuts that took effect in March are the factors that put the brakes on economic growth.
The recent slowdown doesn’t mean the economy is not recovering. New home sales in March reached their second-highest level in three years. Housing prices are continuing to rise, adding to homeowners’s confidence. However, after an increase in consumer confidence in March, it plummeted in April to a three-month low.
“The economy is clearly recovering, but give it some time,” said Mark Vitner, senior economist at Wells Fargo Securities. “Consumer spending will not increase in the coming months, but it goes hand in hand with the state of the economy, which is showing a slow but steady recovery.”