Americans' personal income rose by a modest 0.2 percent in August while personal spending dropped by 0.3 percent for the largest such decline since October 1981, the Commerce Department reported yesterday.
The drop in spending, which was concentrated in autos, is another signal that the recovery's pace has slowed. Adjusted for inflation, it is the second monthly decline in a row, indicating that real personal consumption spending probably will rise very weakly this quarter--perhaps at only about a 1 percent annual rate--compared with a blistering 9.7 percent rate in the spring quarter.
Commerce will release its so-called "flash estimate" for third-quarter gross national product today, with many analysts until recently predicting an increase in real output at a rate of 7 percent or so following the second quarter's 9.2 percent rise. However, the weakness in personal consumption spending, which accounts for about 30 percent of GNP, could produce a lower figure.
Nevertheless, forecasters attribute part of the August drop in auto sales to a shortage of popular models on the eve of introduction of the 1984 cars. Pointing to other relatively strong sectors such as housing, and at business' need to raise low inventory levels, Alan Greenspan of Townsend-Greenspan & Co. said, "All in all, the economy still appears to be quite vigorous. No dramatic slowdown in the rate of growth is likely until inventories have been rebuilt."
In its report, Commerce said that personal income increased $6.5 billion in August to a seasonally adjusted annual rate of $2.755 trillion, but that it would have risen more than twice as much except for the combined effects of the nationwide telephone workers strike and hurricane damage in Texas. The last of three annual $350 lump-sum payments to U.S. Postal Service employes offset the other two special factors to some extent.
The telephone strike lowered private wage and salary payments last month at about a $5 billion annual rate.
The postal payment, along with another retroactive payment called for by settlement of a court suit against the Postal Service, boosted wages at a $3.4 billion annual rate, the department said.
Overall wage and salary payments rose at a $6.8 billion rate compared with a $12.2 billion rate in June and a $14.7 billion monthly average during the second quarter.
Commerce Secretary Malcolm Baldrige said that the personal savings rate, which reached a low of 3.6 percent of personal disposable income in June, rose last month "to a more normal 5.2 percent."
Baldrige said that the savings rate rose because of the July personal income tax cut, which raised disposable income, and the decline in personal spending.
After-tax income last month was running 10.2 percent ahead of the second-quarter pace, Baldrige said in a statement, adding, "In view of this improvement, and with consumer confidence remaining high, future increases in expenditures should be more in line with gains in income."