Personal income rose 0.6 percent in July, a slight improvement over June. But personal disposable income, boosted by the July 1 tax cut, jumped 1.7 percent, the largest increase since the recession began two years ago, the Commerce Department said yesterday.

While personal income increased, personal consumption expenditures moderated, increasing by 0.4 percent, or $8.6 billion in July compared with a 0.5 percent rise in June and a 1.7 percent increase in May.

Purchases of durable goods dropped by $100 million, compared with an increase of $7.0 billion the previous month. Nondurable goods purchases rose $4.8 billion, compared with a $100 million rise between May and June. Consumers bought $4.0 billion more services in July than they did the previous month.

The moderate increase in consumer spending confirmed predictions that the spurt of growth during the second quarter may moderate some, but still exhibit some strength. The gross national product for the second quarter was 8.7 percent and some economists yesterday predicted it could be between 8 percent and 8.5 percent for the third quarter.

Robert Ortner, Commerce Department chief economist, said the moderation in spending was not worrisome. "It is not surprising to see consumers pausing a little to catch their breath," Ortner said. "After the splurge of April and May, consumer spending has finally settled down to a sustainable pace."

Third-quarter growth in the gross national product "will still be very strong," Ortner said. The second-quarter growth reflected increases in residential construction and consumer spending with some inventory liquidation, while improvement during the third quarter will result from companies beginning to rebuild their inventories, Ortner said.

The rise in income and slight increase in outlays also boosted savings to 5 percent of disposable income from 3.7 percent in June, the lowest rate in 30 years, Commerce said.

"Despite the stimulus provided by the July tax cut, growth in real consumer purchases is likely to be more modest this quarter than the 9.7 percent annual rate of gain during the second quarter," Commerce Secretary Malcolm Baldrige said. The "springtime surge followed a substantial rise in consumer confidence and probably included some spending in anticipation of the tax cut as well as an outpouring of pent-up demand."

Personal income rose by a seasonally adjusted annual rate of $15.5 billion to $2.8 trillion in July. Wages and salaries increased $12.2 billion, while farm income dropped by $1.1 billion. Personal income on an annual basis averaged $11,741 in July and after-tax disposable income was $10,051, breaking the $10,000 mark for the first time, Commerce said.

In another report, however, the government said initial claims for state unemployment insurance for the week ended Aug. 6 rose from 371,000 to 383,000 from the previous week. The number collecting state unemployment increased to 3.1 million during the week ended July 30 from 4.4 million the previous week.

Income for commodity-producing industries increased from $1.66 trillion in June to $1.67 trillion in July. Manufacturing income rose from $527.7 billion to $533.8 billion. Service workers' income leaped from $411.2 billion to $414.5 billion in July.