Consumer spending, propelled by brisk auto sales, rose 1.5 percent in August, the biggest gain in six months, while growth in personal incomes lagged, the government reported yesterday.
The Commerce Department said that Americans' incomes climbed a modest 0.5 percent in August, matching the increase in July. However, analysts took encouragement from the fact that the most important income segment, wages and salaries, showed a healthy advance during the month.
Still, with spending far outdistancing the growth in incomes, Americans dug deeper into their savings to make up the difference. Personal savings, the ratio of savings to after-tax incomes, fell to a near-record low of 1.8 percent in August, less than half the 4.3 percent savings rate for all of last year.
The 1.5 percent rise in personal consumption spending followed strong gains of 0.7 percent in July and 0.8 percent in June.
But many analysts said the three monthly increases were deceptive because they came almost entirely from a rebound in car sales, reflecting a return of incentive offers to lure customers into showrooms.
"Consumer spending is still pretty sluggish," said Sandra Shaber, an economist with the Futures Group, a Washington forecasting firm. "Beyond car sales, retail sales have been just about flat after adjusting for inflation."
Part of the reason that consumer spending has been depressed this year is that income growth has had trouble keeping up with the increase in inflation.
Michael Evans, head of a Washington consulting firm, said that wages and salaries have risen at a 6 percent annual rate over the past three months, while consumer prices have been rising at about a 4 percent rate.
He said growth in inflation-adjusted earnings of 2 percent is lackluster and will hold back the economy's performance in coming months.
But David Wyss, an economist with Data Resources Inc., of Lexington, Mass., said that despite the weak income growth, consumer optimism remains high because of the surge in the stock market and the substantial decline in the unemployment rate, which now stands at 6 percent, down from 6.8 percent a year ago.
The purchase of durable goods, including cars, climbed at an annual rate of $29.8 billion in August, compared with a $2.1 billion rise in July. Purchases of nondurable goods rose $3.6 billion, little changed from a $3.3 billion July gain. Purchases of services, including housing, food and entertainment, were up $10.9 billion, compared with an increase of $16.6 billion in July.
The 0.5 percent rise in personal incomes matched the July increase and the April increase and continued the string of modest gains in incomes this year.
However, the key income component of wages and salaries climbed by 0.9 percent last month, the best showing this year, advancing at an annual rate of $19.5 billion in August. Much of the strength came in service industries, where the advance in payrolls of $9.3 billion was three times the July increase.
Manufacturing payrolls increased $3.7 billion in August, substantially improved from a small $300 million advance in July. The August increase in manufacturing was attributed mainly to higher hourly earnings with employes producing autos, primary metals and nonelectrical machinery leading the way in wage gains.
The overall increase in incomes was depressed by a $6.7 billion drop in farm income caused in part by a $3.7 billion decline in government subsidy payments in August.
Disposable, or after-tax, income edged up 0.3 percent in August following a 0.4 percent July increase.
The drop in the savings rate to 1.8 percent in August compared with a July rate of 2.9 percent and was the lowest monthly rate since savings fell to an all-time low of 1.4 percent last April when taxpayers had to dip into savings to pay off tax bills.
The various changes left personal income at a seasonally adjusted annual rate of $3.75 trillion while personal consumption spending, which includes virtually everything except interest payments on debt, climbed to an annual rate of $3.03 trillion.