Income Climbs 0.9%; Spending Rises by 0.7%

Americans’ personal incomes rose a healthy 0.9% in February, the best showing in four months, while consumer spending climbed at the most rapid pace since December, the government reported today.

The Commerce Department said consumer spending, powered by a pickup in auto sales, advanced 0.7% in February, a marked improvement from the 0.1% January increase.

The rise in personal incomes followed a modest 0.3% January increase and was the best showing since a 1.9% increase in October.

With incomes rising faster than spending, Americans’ savings rate climbed as well, rising to 5.2% of after-tax income last month, the highest level since October.

Employment Increase

The big gain in incomes reflected in part healthy increases in employment which occurred during February. The unemployment rate dropped to 5.7% last month, an 8 1/2-year low.

Analysts said the new figures showed that the collapse of stock prices last October has had little impact on consumer spending decisions and provided fresh evidence that the economy should continue expanding this year with no threat of a recession.

The 0.7% increase in personal consumption spending, the biggest advance since a 0.8% rise in December, reflected a big increase of $7.4 billion in sales of durable goods, a category that had declined $2.4 billion in January. The report said this swing came from a rebound in auto sales.

Non-Durable Sales Up

Purchases of non-durable goods, items not expected to last at least three years, rose $2 billion in February after having fallen $7.7 billion in January.

Purchases of services, which include housing costs, increased $12.4 billion following a $13.7-billion rise in January.

Wages and salaries, the most important segment of the income category, rose $15.4 billion in February after a $13.3-billion January increase.

Farm incomes increased $8.5 billion in February after a decline of $8.2 billion in January. The big February gain and the large January decline were both attributed to swings in government subsidy payments to farmers.

Disposable income, the amount left over after taxes are paid, climbed 1.1% in February.