Reports Paint a Conflicting Picture of Economic Growth

WASHINGTON — A burst of data provided an unclear picture of the economy Thursday, showing personal income and spending on the rise at the same time construction and manufacturing activity were slowing slightly.

Some analysts said the reports portray an economy that is showing signs of braking from its torrid first-quarter pace.

“The latest data . . . confirm strong growth for the first quarter but may also be an early indication of growth moderation,” said economist Cheryl Katz of Merrill Lynch & Co.

Others, however, said the data reflect special factors such as flooding and strikes.

“The economy continues to have very good momentum, and we see the Federal Reserve continuing to tighten” credit to keep the economy from sparking a new round of inflation, said Astrid Adolfson, an economist with MCM MoneyWatch in New York.

The Fed boosted its key short-term interest rate from 5.25% to 5.5% on March 25. Analysts are divided over whether it will vote another increase at its meeting May 20.

On Wall Street, the Dow Jones industrial average slipped 32.51 points to 6,976.48, but the broad market was higher. Bond yields fell, suggesting that bond investors were happy with Thursday’s data.

The National Assn. of Purchasing Management’s index of April business activity slipped to 54.2% in April from 55.0% in March, suggesting the manufacturing sector continued to grow but at a slower pace.

The widely followed industry survey did not indicate any inflation pressures as the second quarter began. Prices paid for raw materials fell for the first time in five months.

But because the index remained near its recent high, it suggests the government’s monthly employment report to be released today will be “on the moderately strong side,” Adolfson said.

Consumer spending, supported by a 0.6% increase in personal income, rose in March by 0.5% for a second straight month, the Commerce Department reported.

Consumer spending, which accounts for two-thirds of the nation’s economic activity, shot up 1.2% in January. It was the driving force behind the economy’s explosive 5.6% growth rate in the January to March quarter. Still, incomes rose to an annual rate of $6.75 trillion, up from $6.71 trillion in February.

Private wages and salaries, the most closely watched component of income, rose 0.6% in March, or $27.7 billion, on top of a 1.3%, or $48.7-billion, rise in February.

Subtracting spending from income, Americans’ saving rate--savings as a percentage of disposable income--edged up to 5.3% from February’s 5.2% rate, the government said.

In a separate report, the Commerce Department said construction spending slipped 0.2% in March to a seasonally adjusted $600.1-billion annual rate, from $601.4 billion in February.

Some analysts said mild weather in February accelerated construction activity at March’s expense. Still, February’s revised 1.9% gain was below the 2.3% jump first reported.

The Labor Department reported separately that the number of first-time claims for jobless benefits shot up by 28,000 last week to a seasonally adjusted 347,000.

That is the highest number since January, but some analysts said the total was boosted in part by the floods in the upper Midwest and the ripple effect of strikes in the auto industry.

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Personal Income

Seasonally adjusted annual rate, in trillions of dollars:

March: $6.75

Source: Commerce Department

Personal Spending

Seasonally adjusted annual rate, in trillions of dollars:

March: $5.37

Source: Commerce Department

Construction Spending

In billions of dollars, seasonally adjusted:

March: $600.1

Source: Commerce Department

Purchasing Managers’ Index

In billions of dollars, seasonally adjusted:

April: 54.2%

Source: National Assn. of Purchasing Management