Incomes Rise Slightly, but Spending Jumps

Economic reports Friday showed Asia’s economic troubles are lapping at American shores: Incomes stagnated in U.S. goods-producing industries, manufacturing activity slowed, and construction decreased.

Consumers, though, kept right on spending.

Reports from the government and a private group offered abundant evidence that economic growth was ratcheting down to a more moderate pace after clipping along at a rapid 4.2% annual rate in the first quarter.

During March, consumers increased their spending by a healthy 0.5%, the Commerce Department said. But they had to dip into savings to do it, because income growth was a moderate 0.3%, the smallest in seven months.

The savings rate--savings as a percentage of after-tax income--slipped to 4.2% in March from 4.4% the month before.

Wages grew only 0.2%, helped by increases for government and service industry workers. But wages were unchanged in goods-producing industries and down slightly in distributive industries. Economists saw the figures as a reflection of the decline in export sales to Asia.

The slowdown continued in April, according to an index of business activity compiled by the National Assn. of Purchasing Management.

The NAPM’s index, a closely watched gauge of factory output, fell to 52.9 in April from 54.8 in March.

Analysts had expected an April reading of 53.9. The above-50 reading suggests manufacturing expanded in the first month of the second quarter.

There was good news in the NAPM report’s price index, considered by some an indication of the inflation rate. It fell to 41.2 in April from 44.4 during March--the fourth straight month the index has signaled falling prices.

“The basic message is that the economy boomed in the first quarter, but the most rapid growth for this year is probably now behind us,” said economist Lynn Reaser of NationsBank Corp. in Jacksonville, Fla.

Separately, the Commerce Department said construction spending fell 0.5% in March--the worst drop in 15 months. Construction of single-family homes rose 2.2% to an all-time high. However, spending on apartments, offices and a wide range of government projects declined.

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Associated Press and Bloomberg News were used in compiling this report.