Saturday, August 28, 1999
Wages, spending up
'Consumers aren't tapped out'
The Associated Press
WASHINGTON — Americans' income crept up in July, while consumer spending rose faster but not at the frenzied pace of earlier this year.
The Commerce Department said Friday that personal income — which includes wages, interest and government benefits — rose a slower-than-expected 0.2 percent last month, the smallest gain this year.
The shortfall from expected growth “was totally due to the timing of farm disaster relief subsidy payments, which plunged 54 percent in July after soaring 105 percent in June,” First Union's chief economist David Orr said.
Excluding the effects of those payments, income would have grown 0.5 percent in July — in line with many analysts' expectations, Mr. Orr said.
Wages rose a solid 0.7 percent in July, following a 0.5 percent gain in June.
In June, overall personal income shot up 0.7 percent, boosted by wage gains, but mostly reflecting that hefty increase in disaster payments to farmers.
Consumer spending, meanwhile, rose 0.4 percent last month, slightly less than many analysts had expected, but a little more brisk than the 0.3 percent increase in June.
Still, July's spending increase was less exuberant than gains earlier in the year. In February, spending rose 0.9 percent; in March and April, it went up 0.6 percent; and in May 0.5 percent.
“There's a bit of a slowdown in the pace of spending. How many cars can a person buy?” said Richard Yamarone, senior economist with the Argus Research Corp., an independent research firm.
“But consumers aren't tapped out, they'll continue to spend but at a slower pace.”
Because consumer spending has repeatedly outpaced incomes, the nation's savings rate — savings as a percentage of after-tax income — has set a string of record lows this year, with the lowest a negative 1.5 percent in May.
In July, the savings rate was barely better: minus 1.4 percent.
A major reason for the negative savings rate, economists say, is the strong stock market is boosting Americans' net worth and making them more comfortable about dipping into savings to pay for their spending sprees.
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