Americans’ personal income inched up 0.3% in August but spending fueled by a car-buying spree soared 1.2%, a combination that squeezed the national savings rate to the lowest on record, government economists said today.
The rise in after-tax income actually available to spend amounted to only $10 for every American, bringing per capita annual income to $11,350.
The figures were among the last ingredients necessary for the government to estimate on Friday the current rate of growth for the economy, anxiously awaited by investors and business planners.
The savings rate slowed in August to only 2.8% of disposable income, the lowest since monthly savings rates were first recorded in 1959.
Low in 1950
Economists consider the quarterly low for savings to be the third quarter of 1950--2.6%--when Americans spent wildly to lay in supplies that they believed would be in short supply during the Korean War.
Income without adjustment for inflation rose at an annual rate of 4.1% in the first half of this year, less than half the improvement last year.
July’s personal income went up only 0.4%.
The income figure was weakened in August by the comparison with July, a month in which large retroactive Social Security payments were sent out, based on a recalculation of the earnings base.
Private wages and salaries saw a healthy gain in August. Factory pay was up at an annual rate of $3.6 billion, compared to a small decline in July. Service industry income gained $4.4 billion.
Farm Income Drops
But farm income dropped $1.2 billion, more than twice the decline in July.
Economists and forecasters have been especially frustrated lately by the mixed economic signals. The housing industry, which the Census Bureau on Wednesday said started 6.2% more housing units in August than July, has resisted any deterioration. And clearance-sale financing rates for 1985 cars have boosted auto purchases dramatically.
But growth areas outside the temporary buying spree at auto dealerships have been hard to find. Manufacturing production has been weak for a year.
On Friday, government economists must pick a growth figure for the gross national product in the current July-September period, a guess that could profoundly affect foreign exchange markets worldwide and Wall Street if it is far from the 3.5% to 4% growth generally expected.
The decline of the savings rate in recent months has been of special concern to analysts who see the American consumer harder pressed by debt repayments.
The 1.2% increase in spending followed very weak figures of 0.4% in July and 0.2% in June. It was the strongest growth in spending since April’s identical 1.2%.