Ahead of the Bell: Personal spending and income

WASHINGTON (AP) - Personal spending is expected to show a sharp jump for March that will outpace a smaller gain in incomes.

Economists surveyed by Thomson Reuters are looking for personal spending to rise by 0.6 percent in March, double the 0.3 percent gain in February.

These economists believe that personal incomes will rise 0.3 percent, up from a flat reading in February. The Commerce Department will release the report on personal spending and incomes at 8:30 a.m. Monday.

The rise in spending will be encouraging but economists are worried that those gains could fade in coming months unless the unemployment rate starts falling and employment growth starts to boost incomes, giving consumers the fuel needed for further gains in spending.

Consumer spending is closely watched because it accounts for 70 percent of economic activity.

On Friday, the government reported that the overall economy, as measured by the gross domestic product, grew at an annual rate of 3.2 percent in the January-March period.

That growth was led by a 3.6 percent increase in consumer spending, the best performance in three years.

Economists believe Monday's report will show that consumers financed much of the spending gain by dipping into savings since income growth is continuing to lag.

For the recovery to be sustained, analysts said that employment will have to start rising at a faster pace.

"Rising employment is crucial to provide income support for spending over the rest of the year," economists at IHS Global Insight wrote in a research note.

But analysts believe that improvement did not occur in April. They are looking for the April jobless rate to remain at 9.7 percent, marking the fourth straight month at that level. The April jobless report will be released Friday.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.