Americans Earned More, Spent Less in September

WASHINGTON —  Americans earned more for the fourth consecutive month in September but were also frugal and saved more, the government said Monday in a report signaling slower economic growth ahead.

Consumer incomes from all sources grew 0.4% to a $6.1-trillion annual rate after edging up 0.1% in August, the Commerce Department said. But spending rose just 0.2% to a rate of $4.92 trillion after jumping a revised 0.8% in August.

Consumers owe so much in credit card and other debt that they are slowly being forced to spend less, which could be a drag on the economy in the fourth quarter, analysts said. Consumer spending accounts for two-thirds of the nation’s economic activity.

“Given the debt situation, it’s good to see income growth coming in at higher rates than spending,” said economist Daryl Delano of Cahners Economics Inc. in Newton, Mass.

A spurt in spending helped drive gross domestic product--the government’s broadest measure of the economy--up at a brisk 4.2% rate in the third quarter, the government reported Friday.

Analysts said Monday’s report confirms their belief that the brisk pace of expansion is likely to slow.

“Consumer installment credit has been creeping up steadily for a couple of years now, and there are people who think it could be our downfall,” Delano said. He said he expects more modest growth in the current quarter.

“This fits with the ‘soft landing’ scenario,” said Marilyn Schaja of Donaldson, Lufkin & Jenrette Securities Corp. She predicted that growth will slow to less than 2.5% in the current quarter.

The government also revised downward spending for July and August. Although it was still up a strong 0.8% in August, that was less than the previous estimate of 1%. Spending actually fell 0.3% in July, instead of dropping 0.1%.

Consumer spending, at a seasonally adjusted annual rate of $4.92 trillion last month, represents two-thirds of U.S. economic activity.

Wall Street extended the rally begun Friday, as the Dow Jones industrial average closed up 14.82 points at 4,756.57. The yield on the key 30-year Treasury bond was unchanged at 6.35%.

September’s income advance, raising the total to $6.1 trillion at an annual rate, was well above the weak 0.1% gain in August but smaller than the 0.6% increase a month earlier.

Private wages and salaries, the most closely watched component of income, increased at a $14.8-billion annual rate last month, compared to $6.2 billion in August. But manufacturing payrolls rose $1.9 billion, down from $2.2 billion.

Government wages and salaries rose at a $1.7-billion rate last month, up from $1.3 billion.

Spending reflected the ups and downs of auto sales. Car buying surged in August, as dealers offered steep discounts and rebates to push models out the door, but it fell sharply last month.

Outlays for all big-ticket durable goods, including cars, fell 1.4% in September to a seasonally adjusted annual rate of $635.4 billion. Spending on non-durable goods such as food and fuel rose 0.6% to $1.454 trillion. Spending on services rose 0.3% to $2.827 trillion.

When adjusted for inflation, spending climbed 0.2% in September after rising 0.6% in August.

The Commerce Department said disposable income--income after taxes--rose 0.4% in September after advancing 0.1% in August. The savings rate--savings as a percentage of disposable income--rose to 4.2% in September from 4% in August. In July, the rate was 4.6%.

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Personal Income

Trillions of dollars, seasonally adjusted annual rate:

Sept. 1995: $6.10

Source Commerce Department

Personal Spending

Trillions of dollars, seasonally adjusted annual rate:

Sept. 1995: $4.92

Source Commerce Department