Consumer spending, bolstered by brisk auto sales and heavy use of air conditioning, rose 0.9 percent in July for the second month in a row, more than twice as fast as incomes grew, the government reported yesterday.
The Commerce Department said that personal income rose at a slightly faster rate in July, 0.4 percent compared with 0.3 percent in both May and June.
The July increase was the biggest income gain since a 0.6 percent advance in April.
With the growth of spending far outpacing the growth of incomes, Americans dipped deeper into their savings to make up the difference.
Personal savings, the ratio of savings to after-tax income, fell to 2.8 percent in July from 3.3 percent in June and 4.3 percent for all of 1986.
"It appears low savings rates will be with us for a while," said David Wyss, chief financial economist for Data Resources Inc. in Lexington, Mass.
Despite the lower savings rate, yesterday's report was greeted by economists as a strong sign for the economy and an indication that the nearly five-year-old economic expansion is still continuing. Consumer spending makes up about two-thirds of the gross national product.
"We've got a rebound in consumer spending going, but a small one," said Sandra Shaber, an economist with the Futures Group, a Washington consulting business. "But we should be cautious. This rebound is self-limiting. We have the low savings rate, high debt burdens and small wage gains. For many people, incomes are not even keeping up with inflation."
Inflation for the first seven months of 1987 has been running at an annualized rate of 5 percent as measured by the consumer price index.
Analysts said the heat wave in many parts of the nation this summer contributed to the brisk spending figures as electricity bills surged.
Automobile sales also remained high, as dealers offered price and financing bargains to clear their lots before the introduction of 1988 models.
However, the increase in spending this summer was across a wide range of products and not limited to automobiles and higher electricity charges.
"We are seeing a reemergence of a solid pace of consumer spending," said Allen Sinai, chief economist for Shearson Lehman Bros. in New York.
"The economy can use a good shot of outlays by consumers," Sinai said. "But the figures raise a warning flag. If the kind of results that appeared in June and July were to recur for another month or two, the concern that consumers were outpacing themselves would arise again."
The two months of 0.9 percent spending increases followed a 0.2 percent gain in May. The twin gains were the highest since a 2.3 percent surge in February.
Personal consumption spending, which includes nearly everything except interest payments on debt, rose at an annualized rate of $25.6 billion in July following an increase of $26.9 billion in June.
In July, Americans were spending at the equivalent of an annual seasonally adjusted rate of $2.99 trillion, up from $2.97 trillion in June, the agency said.
Purchases of durable goods, items expected to last three years or more, increased $5.9 billion from June to July to an adjusted annual rate of $418 billion. It is this category that includes automobiles.
Purchases of services, which includes everything from electricity costs to housing and meals purchased in restaurants, rose $14.5 billion in July to an annual rate of $1.23 trillion.
Americans' disposable, or after-tax, income increased 0.4 percent in July after creeping down 0.2 percent in June.
Wages and salaries, the key component in the incomes category, increased at an annual rate of $5.4 billion in July, down slightly from a $5.9 billion June advance.
Manufacturing payrolls decreased by $200 million in July, after a $500 million advance the month before.
Farm income increased, but only barely, by $100 million in July after a $2.5 billion increase in June.