Consumer spending up mainly because of sharp price increases

Don't be fooled by a larger-than-expected increase in consumer spending. People aren't buying more — they're just paying more for their purchases, raising doubts about whether the 130 million stimulus payments the government began sending out this week will be enough to lift consumers' sagging spirits.

The Commerce Department reported Thursday that consumer spending was up 0.4 percent, double the increase that economists had forecast. However, once inflation was removed, spending edged up a much slower 0.1 percent.

The March reading was the fourth straight lackluster performance and did nothing to alleviate worries that consumer spending, which accounts for two-thirds of total economic activity, remains under severe strains, reflecting an economy beset by multiple problems.

Rising food costs, soaring energy prices and rising unemployment have pushed consumer confidence to the lowest levels in five years. Incomes in March rose a weak 0.3 but after removing inflation, after-tax incomes were flat.

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