U.S. Consumer Spending Up 0.9% for July

Americans increased their spending 0.9% in July even though their income grew less than half that rate, the Commerce Department said today.

“Consumers are continuing to spend hand over fist,” said David Wyss, an economist for Data Resources Inc. of Lexington, Mass. Other analysts agreed but said people seem more careful in their buying now than in past years.

The government said July’s 0.9% rise in consumer spending matched a 0.9% rise in June. The government previously figured June’s increase at 0.7%.

Those gains come at a time when personal income before and after taxes increased 0.4% in July.

The rise in personal income to a $3.738-trillion annual rate was the biggest since April and followed revised 0.3% increases in May and June. The Commerce Department at first counted those as 0.5% jumps.

Wages and salary increases accounted for more than a third of the $14.3-billion rise. Most of the rest came from increased Social Security benefits, more income on interest-bearing deposits and higher subsidy payments to farmers.

Donald Ratajczak, head of the Economic Forecasting Project at Georgia State University, said today’s report should quash stories suggesting that the consumer has given up shopping. The real trend, he said, is toward more selective purchasing.

“They’re looking for deals,” he said. “This isn’t a consumer that’s out there buying everything. They really put their head in the sand, for example, when the cost of gas and clothing started going up. It’s the same with autos--when the prices went up they said, ‘To heck with that.’ The consumer will respond if given decent value.”