Increases In Income Outpace Spending Growth September Figures Are Sign Of Moderating Economic Growth, Analysts Say

Consumer spending rose slightly in September in what analysts said was a sign of moderating economic growth.

Just three days after reporting a surprisingly robust expansion in the economy during the third quarter, the Commerce Department said Monday that Americans’ personal income advanced 0.4 percent in September and spending edged up 0.2 percent.

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

“The fundamental story points to moderating consumer spending given weak job and income growth, high consumer debt burdens and a low savings rate,” said Cheryl Katz of Merrill Lynch & Co. “Fourth quarter spending is expected to slow significantly as observed from weak retail sales data so far for October.”

Consumer spending, at a seasonally adjusted annual rate of $4.92 trillion last month, represents two-thirds of the nation’s economic activity.

A Wall Street rally lost some of its steam by early afternoon. The Dow Jones industrial average was up nearly 16 points. The yield on the key 30-year Treasury bond was up slightly to 6.36 percent, moving in the opposite direction of its price.

The government reported Friday that the economy grew at a surprisingly strong 4.2 percent annual rate in the third quarter, nearly three times the pace of the previous three months. But few analysts expect the rapid acceleration to last.

“This fits with the soft-landing scenario,” said Marilyn Schaja of Donaldson, Lufkin & Jenrette Securities Corp., predicting growth will slow to less than 2.5 percent in the current quarter.

“Your country is clearly on a roll,” President Clinton told a White House conference on tourism and travel on Monday. “We have a resurgence of economic growth.”

September’s income advance, raising the total to $6.1 trillion at an annual rate, was well above the weak 0.1 percent gain in August but smaller than the 0.6 percent 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 fell sharply last month.

Outlays for all big-ticket durable goods, including cars, fell 1.4 percent 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 percent to $1.454 trillion. Spending on services rose 0.3 percent to $2.827 trillion.

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

The Commerce Department said that disposable income - income after taxes - rose 0.4 percent in September after advancing 0.1 percent in August.

The nation’s savings rate - savings as a percentage of disposable income - rose to 4.2 percent in September from 4 percent a month earlier. In July, the savings rate was 4.6 percent.