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Consumer Spending Leaps 1.5% as Personal Incomes Rise 0.5%

September 22, 1987|Associated Press

WASHINGTON — Consumer spending, propelled by brisk auto sales, soared 1.5% in August, the biggest gain in six months, while growth in personal income lagged behind, the Commerce Department reported Monday.

The department said personal income climbed a modest 0.5% in August, matching the increase in July.

However, analysts took encouragement from the fact that the most important income segment, wages and salaries, showed a healthy advance during the month.

Still, with spending far outdistancing the growth in income, Americans dug deeper into their savings to make up the difference. Personal savings, the ratio of savings to after-tax income, fell to a near-record low of 1.8% in August, less than half the 4.3% savings rate for all of last year.

The 1.5% rise in personal consumption spending followed strong gains of 0.7% in July and 0.8% in June.

But many analysts said the three monthly increases were deceptive because they came almost entirely from a rebound in car sales, reflecting a return of incentive offers to lure customers into showrooms.

"Consumer spending is still pretty sluggish," said Sandra Shaber, an economist with the Futures Group, a Washington forecasting firm. "Beyond car sales, retail sales have been just about flat after adjusting for inflation."

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