THE ECONOMY : Restrained Economic Growth Seen : Consumers Slowed by Small Gains in Income

American consumers, feeling the pinch of slower income growth, have begun to curb spending in a move that could restrain growth in the nation’s economy.

The impact of the consumer slowdown should be apparent in the May data on personal income and consumption, which the Commerce Department will release Friday morning, economists say.

“There’s no question about it--consumer spending has gotten very sluggish,” said economist Lawrence Chimerine, chairman of the WEFA Group in Bala-Cynwyd, Pa.

Consumer spending habits have been crimped by slow job growth, small income gains and accelerating inflation, which has risen at an annual rate of 6.7% in the year-to-date after gaining 4.4% in 1988.

Earlier this month, the government reported the smallest monthly gain in non-farm payrolls in nearly two years. Increases in wages have also slowed.

Fuels Debate

Car sales have particularly felt the impact of slower income growth, dropping last month from April’s pace as Detroit’s financing incentives expired. At the same time, consumers have sated their appetite for big-ticket items and new homes, putting an additional damper on the economy.

On average, economists expect personal income to rise 0.4% in May, the same increase as in April. Personal consumption is projected to slow to 0.3% growth in May after jumping 1.1% the prior month.

Economists now debate whether the slowdown in consumer spending, which accounts for two-thirds of the gross national product, will dampen the growth of industrial production and investment.

Some say the strong export boom has more than compensated for slack consumer demand, allowing the 6 1/2-year expansion--the longest U.S. peacetime expansion in history--to continue.

“Capital spending has been pretty solid, exports rose sharply in the first quarter, and the April trade figures point to solid export growth in the second quarter as well,” said economist Stephen Roach of Morgan Stanley & Co.

But other economists believe that the strong dollar, which touched 2 1/2-year highs last week, has tempered export growth, weakening the industrial sector and leading to the slow growth in new jobs last month. A strong dollar makes American goods more expensive overseas.

A mixed appraisal of the health of the manufacturing sector accounts, in part, for the wide range of projections on May durable goods orders, which the Commerce Department also releases Friday morning.

Economists expect durable goods orders, which surged an unexpectedly strong 2.9% in April, to increase more modestly, if at all, in May.

Revision Due Today

Estimates range from a decline of 2% to a 1.5% gain depending upon aircraft orders, which are difficult to predict and vary widely each month.

A strong durable goods figure will underscore the economy’s strength in manufacturing, even though consumer gains continue to dwindle, economists say.

Last month the government estimated that GNP, or the value of all goods and services produced, grew at a revised 4.3% annual rate during the first quarter. The second revision of this estimate is due out this morning, and few economists expect any big changes.

Modest consumer spending and income growth in April and May suggest softer GNP in the second quarter, but the consumer sector could rebound later this year, economists say.

“The question is whether the latest consumer numbers represent a new trend or are a bout of temporary weakness,” said Charles Lieberman, economist at Manufacturers Hanover Corp. “I suspect the numbers will rebound a bit.”