Spending slows as gas prices take off

Published: Tuesday, May 1, 2007 at 6:01 a.m.
Last Modified: Monday, April 30, 2007 at 10:47 p.m.

WASHINGTON - Consumer spending rose at the weakest pace in five months in March as a surge in gasoline prices left shoppers with little left over for other items.

The Commerce Department reported Monday that consumer spending on all items was up 0.3 percent last month, the slowest increase since a similar rise in October. That lackluster gain came even though personal incomes rose by 0.7 percent last month.

The spending performance in March was even weaker when the effects of higher gasoline prices were removed. After adjusting for increases, consumer spending actually fell by 0.2 percent in March, the poorest showing since September 2005 when the economy was suffering the aftershocks of Hurricane Katrina.

The weaker-than-expected consumer spending added to worries that the economy could be in danger of stalling out if consumer confidence falters further in the face of rising gasoline prices and a slumping housing market.

"Unless spending posts unusually large gains in May, the second-quarter consumption number is practically guaranteed to be awful,'' said economist Stephen Stanley.

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