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CONSUMER SPENDING SLOWS SHARPLY IN MARCH; SAVINGS RATE EDGES UP By Mark Lieberman, Economist for the Five Star Institute Consumer spending grew just 0.3 percent in March, down from the 0.9 percent growth in February, according to the Bureau of Economic Analysis (BEA). Economists expected spending to be up 0.4 percent. At the same time, personal income grew 0.4 percent in March, BEA said, slightly faster than February's 0.3 percent growth and consensus expectation of 0.3 percent. In dollars, income was up $50.3 billion increase compared to $39.6 billion in February. Spending increased $32.3 billion, about one-third the $96.6 billion increases recorded for February. Consumer spending for the quarter was up $68.1 billion, according to an earlier Gross Domestic Product (GDP) report—also prepared by BEA—accounting for most of the $73.4 billion increase in GDP for the quarter. Consumer spending typically represents about 70 percent of the nation's GDP. Personal savings as a percentage of disposable (after tax) income edged up to 3.8 percent in March from 3.7 percent in February; it was 4.3 percent in January. Despite continuing low interest rates, personal interest payments increased 1.4 percent in March to $161.4 billion from $159.2 billion in February, topping $160 billion for the first time since last September. Wages and salaries rose $18.7 billion or, 0.3 percent, in March, BEA said, after increasing 22 $24.8 billion or, 0.4 percent, in February and $30.4 billion in January. The March slowdown reflects the weaker labor market. Employers added 120,000 jobs in March compared with an average of just more than 200,000 in each of the prior two months. Wage and salary growth accounted for 37.8 percent of the growth income in March, down from 62.3 percent in February. Unemployment insurance payments dropped for the third straight month. "Transfer payments"—various government programs including Social Security, Medicare, Medicaid, and unemployment insurance—represented about 23 percent of the total increase. The increase in spending was weighted to goods, which accounted for 66.2 percent of the total compared with 53.4 percent in February, a good sign for manufacturing. Spending on durable goods fell to $3.7 billion, hinting at a lingering unwillingness by consumers to make purchases that require borrowing. The Personal Consumption Expenditure (PCE) Price Index—often considered the Federal Reserve's favored measure of inflation—increased 0.3 percent and is now 2.1 percent above its year-ago level. In February, the index rose 0.3 percent and the year-over-year increase was 2.3 percent. Meanwhile, the Core PCE Index—excluding food and energy—rose 0.2 percent and is up 2 percent in the last year compared with a 0.1 percent increase in February producing a 1.9 percent yearover-year increase. HAMP EXPANDS ELIGIBILITY TO MORE MILITARY MEMBERS Effective June 1, military homeowners permanently displaced by a job-related move may still be considered owneroccupants when applying for the Home Affordable Modification Program (HAMP). This change means more military members could become eligible for the government's modification program to assist struggling homeowners by reducing monthly mortgage payments. The program update was jointly announced in an online post April 10 by Tim Massad, Treasury assistant secretary, and Holly Petraeus, assistant director for Servicemember Affairs at the Consumer Financial Protection Bureau (CFPB). According to the announcement, borrowers may now qualify if they are displaced due to an out-of-area job transfer (such as Permanent Change of Station orders), intend to return to the home at some point in the future, and do not own any other single-family real estate. HOPE NOW, the voluntary, private sector alliance of mortgage servicers, investors, mortgage insurers, and nonprofit counselors, applauded the initiative in a statement. "The issue of Permanent Change of Station creates a unique set of circumstances for military homeowners who are required to move to a new location. Recognizing many of these homeowners as owner-occupants allows them to qualify for a HAMP modification and creates a mortgage option that was not available before under the current rules," said Faith Schwartz, executive director of HOPE NOW. KNOW THIS Small businesses account for approximately 65% of the country's net new job creation, according to the U.S. Small Business Administration.

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