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Consumer Spending Rises 1.5% on Auto Sales; Income Up 0.5%

September 21, 1987|Associated Press

WASHINGTON — Consumer spending, bolstered by brisk auto sales, jumped 1.5% in August, the biggest increase in six months, the government said today.

The Commerce Department said that Americans' incomes were also up in August but by a much smaller 0.5%, matching the moderate gain posted in July.

With the growth of spending far outpacing the growth in incomes, Americans dipped deeper into savings to make up the difference. Personal savings, the ratio of savings to after-tax incomes, fell to 1.8% in August, down from 2.9% in July and the lowest it has been since a 1.4% rate in April.

Even with the low savings rate, the report showed the economy gaining momentum in the current July-September quarter because of the fast pace of consumer spending, which accounts for two-thirds of all economic activity.

Much of the spending strength came from higher auto sales, which were spurred by new incentive programs offered by dealers in an effort to whittle down a huge backlog of unsold cars.

Analysts have expressed worries that the sluggish income growth coupled with higher inflation rates would force consumers to cut back on spending, but so far that has not occurred.

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