Americans' personal incomes rose a modest 0.3 percent in August but the lure of model-year-end auto sales was so great that they nevertheless boosted their spending by a substantial 1.2 percent, the Commerce Department reported yesterday.
As a result, the portion of disposable income that was saved last month fell to 2.8 percent, the lowest figure recorded since such statistics were begun in 1959. The savings rate normally runs about 6 percent, and the previous monthly low was 3.6 percent in March. The report on income and outlays did little to resolve the considerable uncertainty about where the economy is headed in coming months.
The big rise in personal consumption spending will add some strength to the gross national product for the third quarter.
Commerce will release its so-called flash estimate of third-quarter GNP today. Many analysts expect it to show an increase at a 2 1/2 percent to 3 1/2 percent rate, somewhat more than the second quarter's 2 percent figure.
But the 0.3 percent increase in income was down a bit from the 0.4 percent increases of June and July even though wages and salaries rose at an $11.5 billion rate in August, compared with a $2.2 billion rate in July.
Analysts are divided over whether the gains in employment and hours worked that pushed up wages last month will be repeated in September, or whether they were swollen by an unusual pattern that produced fewer summer plant closings than usual. The July income figures had been increased by a one-time retroactive payment of Social Security benefits at a $5.4 billion rate. So far in 1985, personal income has risen slightly more than 0.3 percent a month, or less than half as fast as during 1984. Meanwhile, personal outlays have gone up more than 0.6 percent per month.
"Consumers are spending beyond their means," declared economist Allen Sinai of Shearson Lehman Brothers. "We have bargain-conscious consumers, and they borrowed from the future to take advantage of a good deal.
"It is a shot in the arm for third-quarter GNP, but income growth will have to be larger to have the economy grow at a 3 percent rate in the future ," he said.
Alan Greenspan of Townsend-Greenspan & Co. is skeptical of the numbers. "Either there is the most extraordinary savings behavior on the part of the consumer or the data are flaky," he said. "I suspect that when the numbers are revised in December that we will find that the savings rate is not this low."
While he does not fully trust the reported figures, Greenspan does accept their general thrust. "It does look as if the savings rate is low, that personal income growth is slow and that any expectation of an acceleration in retail sales coming from a drop in the savings rate from here on is unrealistic."
The point, Greenspan stressed, is that consumers won't continue indefinitely to increase their spending faster than their income. The third-quarter flash GNP number will depend heavily on Commerce Department estimates of August and September trade balances and changes in business inventories, he added.
"It is quite possible that we will get a GNP figure for the third quarter that is increasing in excess of 3 percent, but we have to distinguish between that and the real world," Greenspan continued. The evidence at the moment indicates strongly that no recession is imminent, but it "does not yet confirm that renewed growth is actually under way."
In yesterday's report, the Commerce Department said that personal consumption spending rose $31.1 billion last month to a seasonally adjusted annual rate of $2,541.5 billion. That compared with an $11 billion increase in July, a figure that was revised downward slightly.
The department's Bureau of Eco- nomic Analysis also revised downward somewhat the spending estimates for the second quarter. Unless there are offsetting increases"Either there is the most extraordinary savings behavior on the part of the consumer or the data are flaky." -- Economist Alan Greenspan in other parts of GNP, that could mean that the second-quarter GNP figure, the second regular revision of which will be released today, will be lowered.
Spending last month rose for durable and nondurable goods and for services. But more than three-fourths of the gain was for automobiles, the department said. On the income side, nonfarm proprietors' income rose at a $2.7 billion rate, up from July's $1.1 billion.
Transfer payments fell at a $4.4 billion rate, compared with July's $8.2 billion rise because of the Social Security payment. Farm proprietors' income fell at a $1.2 billion rate in August following a $0.5 billion decline in July.
Personal interest income, which represents 14 percent of total personal income, fell $0.9 billion to a $451.2 billion rate. That left it only 0.4 percent higher than in August 1984. Over the same 12-month period, total personal income rose 5 percent, and personal consumption spending went up 8.1 percent. Interest paid by consumers to business, which is not part of personal consumption spending and does not show up in GNP, rose from a $79.9 billion rate to a $96.2 billion rate, a 20 percent rise.
This much more rapid rise in interest payments than in income, and the big jump in consumer debt underlying it, is another reason many analysts believe growth of consumer spending will soon slow.