Personal Income and Consumer Spending Up Slightly in January

Personal income and consumer spending both climbed a notch last month in modest gains that analysts said followed an emerging map of steady economic growth and low inflation.

The January statistics released Tuesday did little to excite private economists either toward new optimism or pessimism--in part because they were more or less in the range anticipated and also because both were heavily influenced by several one-time developments.

On the income side, it was primarily a federal pay raise that accounted for a 0.5% gain. On the spending side, it was January’s unusually cold weather, which showed up in higher spending for utility bills and gave impetus to a 0.6% rise.

“If Wall Street is looking for moderate growth with low inflation, these numbers support that expectation,” said Sandra Shaber, senior economist at Chase Econometrics in Bala Cynwyd, Pa. “On the other hand, if they are looking for the kind of rapid economic growth that some say is going to let us grow out of the deficit, we’re not seeing that.”

President Reagan is among those who suggest that economic growth will resolve huge federal budget deficits.

‘Positive Signs’

At the White House, presidential spokesman Larry Speakes said the figures were positive signs as the economy moves into a new year of sustained growth.

Federal Reserve Chairman Paul A. Volcker, meanwhile, was telling a Senate committee much the same thing in his annual report.

“Economic growth is expected to remain strong enough in 1985 to produce some further decline in unemployment, with little if any pickup in inflation,” Volcker told the Senate Banking Committee.

While the 0.5% December-to-January rise in personal income bettered the 0.4% increase recorded a month ago, it was due mostly to a 3.5% pay increase for federal civilian employees and a 4% raise for military personnel.

Moreover, the Commerce Department said both the December and January figures were also affected by a variety of bookkeeping factors, such as shifts in the timing of Social Security and military retirement benefits.

Discounting those factors, the report said, personal income would have been up only 0.1% in January and the December increase would have been 0.7%.

“The disappointing part was that wage and salary growth slowed down considerably even with job gains,” said Shaber. “Hours were down, wage rates were flat if not down. They did not look real hot.”

She said the 0.6% increase in consumer spending--compared to a 0.3% gain in December--also was lower than expected, although not alarmingly so.

Purchases of durable goods such as automobiles and appliances dipped $1.6 billion, compared to a $9.1-billion increase the previous month.

Purchases of services increased $15.3 billion in January, against a $2.9-billion increase in December. But if electricity and heating gas payments had been deleted, service purchases would have increased only $7.1 billion in January and would have been up $10.1 billion from November to December.

Farm income declined $2.6 billion in January, compared to an increase of $600 million in December.

Personal saving rose slightly to an annual rate of $155 billion in January, compared to $154.9 billion in December. That left the national savings rate--savings as a percentage of disposable income--at 5.8%, against 6% in December.