Americans' personal income continued its steady upward march in January, rising 0.3 percent for the sixth month in a row, but their spending fell because of a sharp drop in purchases of new motor vehicles, the Commerce Department reported yesterday.
A number of analysts said spending probably fell again last month, though the numbers aren't in yet. That's because of another decline in auto purchases as well as the wipeout of Presidents' Day sales in the Northeast because of a major snowstorm.
Separately, Commerce said that construction spending increased an unexpectedly strong 1.7 percent in January, principally because of construction of new homes. And the Institute for Supply Management said its index tracking conditions in the manufacturing portion of the economy fell to 50.5 last month from 53.9 in January.
It was the fourth consecutive month in which the reading was above 50, the point at which the factory sector is neither expanding nor contracting. But after declining in both of the past two months, the index has returned to its November level.
Some forecasters said certain numbers, especially those for consumer spending and manufacturing activity, were disappointing but not surprising. Overall, the forecasters saw them as consistent with continued slow economic growth.
"It's more of the same," said Wayne Ayres, chief economist at FleetBoston Financial Corp. "Nothing is going to happen in the economy in a fundamental way until Iraq is settled. That's the key to a better recovery. The economy hates uncertainty."
"Manufacturing is poised to turn in a better performance, but it is on hold right now, particularly with regard to capital spending," he said.
Federal Reserve Chairman Alan Greenspan "is right," Ayres added. "The numbers look pretty good, and even a modest pickup in demand will mean more employment. We still have good growth in income, and while the employment market has deteriorated a bit in recent months, it's not as bad as it was in previous recessions."
Disposable personal income, which is essentially after-tax income and is an important determinant of consumer spending, rose 0.2 percent in January after adjustment for inflation. Over the past 12 months, this measure rose 3.2 percent. Personal saving as a share of disposable personal income rose to 4.3 percent in January from 3.9 percent in December. The latter figure was also the average for all of last year, compared with only 2.3 percent in 2001.