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U.S. Personal Income Gains a Modest 0.3% : Consumer Spending Rises a Healthy 0.7%

March 21, 1985|Associated Press

WASHINGTON — Americans' income in February rose at the slowest pace in nine months, but consumer spending advanced at a healthy rate, the government said Wednesday.

The Commerce Department said personal income rose only 0.3% last month, just half the 0.6% increase of January.

While it was the smallest monthly gain since a 0.3% increase last May, analysts said some of the weakness stemmed from bad weather that forced plant shutdowns during the month.

Consumer spending advanced a much healthier 0.7% following strong gains of 0.8% in both January and December.

Analysts said the eagerness of consumers to continue spending should provide strong economic growth in coming months.

Consumers 'Alive and Well'

"Consumers are alive and well. They are spending and borrowing freely, based on plentiful jobs, low inflation and a generally upbeat mood," said Allen Sinai, chief economist at Shearson Lehman Bros.

Sinai said the gain in consumer spending would ensure a good rate of growth in the coming months.

The government will release its preliminary estimate for overall economic growth--the gross national product--today. Most economists are looking for a growth rate of about 4%.

But Jerry Jasinowski, chief economist for the National Assn. of Manufacturers, said the GNP rate could be lower than that because of the battering that domestic producers are taking from foreign competition.

The $10.4-billion February gain in personal income included a $6.3-billion increase in private wages, up from a $3.2-billion January increase. This gain came despite the fact that payrolls at manufacturing plants declined $1.1 billion in February.

Government wages and salaries increased $2.3 billion last month, down from the $4.9-billion January increase, which had come from federal military and civilian pay raises. Government transfer payments increased $1.9 billion in February after an $18.4-billion January gain, which came from cost-of-living increases for Social Security recipients.

Consumer spending rose $18.2 billion, with the big jump coming in purchases of non-durable goods, such as clothing, which rose by $10.9 billion, compared to a $3.5-billion January increase.

Disposable, or after-tax, income rose 0.3% in February, down from the 0.7% January gain.

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