Business in brief: Rise in spending is misleading
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 mailing 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.
It was the fourth straight lackluster performance.
Rising food and energy costs, and falling 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.
“Consumers are facing bad news on all fronts,” said Nigel Gault, chief U.S. economist at Global Insight.
CHICAGO
Airlines’ merger could fly in D.C.
United Airlines and US Airways saw their first attempt at marriage foiled in 2001 by the deal’s high cost and stiff opposition.
A new consolidation proposal could face an easier route in Washington. But first it has to get past unhappy pilots and other obstacles that could ground any bid to create the world’s largest airline.
The two carriers are in advanced talks to join forces, scrambling to respond to the threat posed by the proposed Delta-Northwest mega-carrier. No agreement is assured, and either airline could walk away to seek another partner or an alliance instead.
UAL Corp.’s United sees the chance to gain a bigger foothold in the Northeast and attract more customers for flights to Europe.
But US Airways Group Inc. still hasn’t resolved pilot seniority and other loose ends from its acquisition by America West in 2005. Also, sky-high fuel prices and an expected decline in air travel demand could limit any savings.
SACRAMENTO, CALIF.
Passenger rights law advances
Passengers stuck on grounded airplanes for more than three hours would have a right to fresh air, electricity, working restrooms, food and water under a measure passed Thursday by the California Assembly.
The measure, by Democratic Assemblyman Mark Leno of San Francisco, passed 57-17 and now goes to the state Senate. Leno modeled his measure after a New York law that has been blocked by a federal appeals court from taking effect.
David Castelveter, a spokesman for major airlines, argued that federal law forbids states from dictating how to treat passengers and said airlines might sue if Leno’s measure becomes law.
At the national level, Sen. Barbara Boxer, D-Calif., is pursuing a federal airline passenger bill of rights that would allow people to leave a grounded plane within three hours if the airline does not have a federally approved contingency plan for such situations.