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Reports: Slump may not worsen

Spending, income, construction rise

The Commerce Department reported yesterday that construction spending in March rose for the first time in 11 months. (JEFF HAYNES/AFP/Getty Images)

WASHINGTON -- Consumers' spending and income showed bigger-than-expected gains in February, and construction posted the first increase in nearly a year, hopeful signs that the economic slowdown will not worsen.

The Commerce Department reported yesterday that consumer spending, bolstered by strong income gains, was up 0.6 percent last month, while consumer income rose a similar 0.6 percent.

Both figures were double what analysts had expected.

Separately, the department said construction spending rose 0.3 percent last month, the first increase in 11 months, since a 1 percent jump in March 2006.

Since then, construction has either fallen or been flat each month as the industry was jolted by a sharp slowdown in housing activity.

For February, strong gains in construction of hotels, shopping centers, and state and local government projects offset the 11th-consecutive decline in residential construction.

Analysts, who had been forecasting another drop in the overall construction figure, said the February performance was good news, especially in light of February's colder-than-normal weather, which had been expected to hold back activity.

The strength in consumer spending and construction helped to alleviate fears that the country could be headed into a recession.

Those worries were elevated by a string of weaker-than-expected reports in recent weeks and by turmoil in financial markets, including a 416-point drop in the Dow Jones industrial average on Feb. 27.

For the quarter, the Dow was down about 0.8 percent, suffering its first losing quarter since falling more than 2 percent in the second quarter of 2005.

Analysts cautioned that they still believe the economy has slowed further in the January-March period, continuing a yearlong trend of lackluster growth as the country was battered first by soaring energy prices, followed by a slumping home market and troubles in auto manufacturing.