Hikes Posted in Personal Income, Savings : February Spending Tied to Winter Chill, Commerce Department Says

From Associated Press

Americans’ personal income increased a strong 1% in February while spending rose at half that pace, as people diverted more of their earnings into savings, the government said today.

The Commerce Department said income rose to a seasonally adjusted annual rate of $4.32 trillion last month after a robust revised gain of 1.7% in January.

Consumer spending, meanwhile, rose 0.5% to a seasonally adjusted annual rate of $3.38 trillion in February after increasing a revised 0.4% in January.

Most of the gain in personal consumption expenditures, which include virtually all consumer spending except interest payments on debt, came in increased spending for services. Analysts said that was partly a reflection of an upturn in heating bills last month after January’s mild weather.


Spending on services rose 1% last month, while purchases of non-durable goods edged up 0.1% and spending on durable goods declined 0.3%, held back in part by slow car sales.

Most analysts expect gains in income and spending to slow this year in response to a campaign by the Federal Reserve Board to nudge up interest rates and relieve inflationary pressures on the economy.

Other government reports for February have suggested an economic slowdown already may be setting in, with declines recorded in retail sales, housing construction, factory operating rates and orders for durable goods.

Last month’s changes in income and spending bolstered the personal savings rate--savings as a percentage of after-tax income--to 5.9% from 5.4% in January. February’s rate matched the savings level set in April, 1986, and has not been surpassed since May, 1985, when the rate was 6.4%.


February’s increase in personal income included a large increase in farm subsidy payments. Excluding that effect, income rose 0.7% last month.

Disposable, or after-tax, income increased 1.1% in February after a 1.7% gain a month earlier.

Wages and salaries, a key component of personal income, rose 0.6% to $2.57 trillion in February after a 1.1% gain in January.