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 The data from the Commerce Department on Friday took the sting out
of a separate report that showed consumer sentiment dipped in March.
Economists said they expected household morale to perk up with
warmer weather in the spring.
"So the winter may have slowed things temporarily, but with
consumers still spending and incomes rising, we should see solid
growth in the months ahead," said Joel Naroff, chief economist at
Naroff Economic Advisors in Holland, Pennsylvania.
Consumer spending rose 0.3 percent last month after a downwardly
revised gain of 0.2 percent in January.
Separately, the Thomson Reuters/University of Michigan's consumer
sentiment index dipped to 80.0 in March from 81.6 in February. It
was little changed from a preliminary reading earlier this month.
A combination of bad weather, an effort by business to work off
bloated inventories, the expiration of long-term unemployment
benefits and cuts to food stamps is expected to hold back growth to
around a 1.5 percent annual pace in the first quarter.
But a rebound is expected as those factors fade. The economy grew at
a 2.6 percent rate in the fourth quarter.
U.S. financial markets were little moved by the data as investors
digested remarks by Chinese Premier Li Keqiang that his government
was ready to support China's cooling economy.
SERVICES SPENDING UP
Consumer spending, which accounts for more than two-thirds of U.S.
economic activity, was bolstered by a rise in outlays for services,
likely because of higher demand for health care and utilities.
When adjusted for inflation, spending rose 0.2 percent, but
January's gain was just 0.1 percent, not the more-robust 0.3 percent
increase reported a month ago.
The revision suggested spending cooled this quarter after logging
its fastest pace in three years in the final three months of 2013.
Goldman Sachs lowered its first-quarter GDP growth estimate by
one-tenth to a 1.5 percent rate, while forecasting firm
Macroeconomics Advisers cut its forecast by two-tenths to a 1.3
percent pace.
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"With the downward revision to real spending in January, the
contribution from consumption is likely to be more modest than
previously thought," said Millan Mulraine, deputy chief economist at
TD Securities in New York.
Income rose 0.3 percent last month after rising by the same margin
in January. It continues to be supported by government transfers for
healthcare payments, which offset the drag from the expiration of
the long-term unemployment benefits.
The saving rate, which is the percentage of disposable income
households are socking away, rose to 4.3 percent from 4.2 percent in
January.
There was little sign of inflation.
A price index edged up 0.1 percent for a second straight month, and
was up just 0.9 percent from a year ago. That marked a slowdown from
January's 1.2 percent year-on-year advance and was the smallest
12-month gain since October.
Excluding food and energy, prices rose just 0.1 percent for an
eighth straight month, keeping the 12-month gain capped at 1.1
percent, the same as in January.
Both measures remain stuck well below the Federal Reserve's 2
percent target, providing ample scope for the central bank to move
slowly in raising interest rates. The Fed plans to wrap up a
bond-buying program later this year, but it is not expected to move
rates higher until sometime in 2015.
"The persistence of extremely weak inflation is cause for concern
and will continue to be a focus of the Fed," said Diane Swonk, chief
economist at Mesirow Financial in Chicago.
(Reporting by Lucia Mutikani; additional reporting by Ryan Vlastelica;
editing by Tim Ahmann and Paul Simao)
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