Personal Income Gain Is Smallest in Year

Americans’ personal income, dealt a blow by Hurricane Hugo, rose a lackluster 0.3% in September as consumer spending posted its weakest advance in a year, the government said Friday.

The Commerce Department said personal income in September rose $12.8 billion at a seasonally adjusted annual rate to $4.47 trillion, the smallest increase in four months.

Spending increased 0.2%, the most anemic gain in 12 months, to an annual rate of $3.53 trillion.

“September marks the beginning of the end of the consumer revival,” said economist Allen Sinai of the Boston Co. “Because of sluggish income growth and caution in spending, consumers will hunker down, especially on big-ticket items.”

Other signs of weakness in the month include a decline of 103,000 manufacturing jobs and a slight drop in orders for big-ticket durable goods.

Economists, who this spring were expecting a recession to develop, were somewhat relieved by a rebound in spending this summer.

However, Sinai predicted that consumer spending would shrink during the October-December quarter, a rare event. That will lead to sluggish economic growth, as measured by the gross national product, at an annual rate of less than 1%, he said. By the first half of next year, the nation will topple into a mild recession, he believes.

The government announced earlier this week that the GNP grew a moderate 2.5% in the third quarter, the same as in the previous three-month period.

Other economists, however, noted that the September report was not as bad as it first appeared because consumer spending was held back by a swing in automobile purchases and incomes were depressed by one-time losses from Hugo, which struck North Carolina and South Carolina on Sept. 21.

“It’s a mixed report, but it wasn’t terrible,” said economist Michael K. Evans, who heads a consulting firm in Washington. “Nobody thinks the economy is going to boom. The question is whether it’s heading for a recession. These numbers say ‘no.’ ”

Last month’s personal income growth followed an identical 0.3% advance in August and a 0.6% increase in July. Spending posted robust gains of 0.9% in August and 0.8% a month earlier.

The report noted that without the effects of Hugo, incomes would have risen twice as much, 0.6%, in September. The impact amounted to $13 billion at an annual rate. Most of that came in a $9-billion drop in rental incomes.