Americans' personal income grew in July by the largest amount in four months, mainly because of a cost-of-living increase in Social Security benefits, the Commerce Department said yesterday.

Total personal income received from working, savings, investment and other sources grew by $11.7 billion, or 0.8 per cent, the report said. Wages and salaries grew by 0.5 per cent, a slight improvement from the 0.4 per cent increase the month before.

The July personal income figures were the strongest gain since a 1.4 per cent increase in March, which followed a weak showing in February. The increases were 0.7 per cent in April and 0.5 per cent in both May and June.

Personal income was at a seasonally adjusted annual rate of $1,536 billion.

Among figures included in personal income are wages and salaries, interest, dividends and Social Security benefits. Money saved by homeowners who otherwise would have paid rent also is counted as income.

The biggest increase in July was in transfer payments, which rose from $102.1 in June to $107.4 billion in July. About $5 billion of that reflects a 5.9 per cent cost of living increase for Social Security benefits.

Manufacturing payrolls rose by $1.1 billion, down from the $2.5 billion increase in June. The smaller increase was mainly because of a decline in average weekly hours. Employment and average hourly earnings increased about the same in both months.

Increase in payrolls for machinery, textiles and lumber more than offset declines in primary metals, transportation equipment, rubber and food.

Farm proprietors' income declined for the fourth straight month. Dividend payments were up $240 million in July, after a $2.3 billion rise in June, when an extra dividend payment was declared by General Motors.

Rental in July, reflecting flood damage to dwellings in Johnstown, Pa.

In another development, Commerce said business increased inventories by 0.7 per cent in June, while sales were marginally stronger than in May, June sales rose by 0.2 per cent, all at the manufacturing level.

Rising inventories coupled with higher sales indicate an expanding economy, although a Treasury Department economist said the expansion rate is "not what you'd expect for strong growth."

Industrial production has slowed to a 6 per cent annual growth rate after a big 10 per cent gain in the late winter and spring. Construction of new homes and apartments is surging at a four-year high, inventories are growing and personal income is up.

The reports all show comfortable economic growth. But there was some disquieting data concerning income and its affect on personal spending, which accounts for two-thirds of gross national product, the broadest measure of the national economy.

A treasury economist said that although nearly half the income gain was a one-month "abberation" caused by Social Security payments, "The economic effect will still be salutary. Reired people spend money, too."

The July income report was based on preliminary data subject ot revision. Commerce said its income estimates for May and June have been reduced by more than $2 billion each.