Consumer Spending Off 0.2% in October : Economy: Decline reflects plummeting auto sales. Analysts see sharp drop in GNP during current quarter.

Consumer spending fell 0.2% in October, its largest decline in nearly three years, despite a 0.9% gain in personal incomes, the Commerce Department reported today.

The drop in consumer spending, reflecting plummeting auto sales, followed a 0.3% advance in September. But auto sales have continued to fall, foretelling continued sluggishness in the spending sector this quarter.

Consumer spending is watched closely as a barometer of economic health because it accounts for about two-thirds of the nation’s economic activity. The reports provided fresh evidence that the economy is continuing to slow.

As measured by the gross national product, the economy grew at a 2.7% rate in the third quarter, but analysts expect a sharp decline in the current three-month period that began in October.

Personal income in October totaled $4.51 trillion at a seasonally adjusted annual rate, after a 0.9% gain in September. It was the largest gain since a 1% advance last March.

Although the San Francisco Bay Area earthquake reduced incomes about $21 billion at an annual rate in October, that decrease was offset by increases in farm subsidies and bonus payments in the auto industry.

Spending declined to an annual rate of $3.53 trillion after a 0.3% gain in September. It was the first decrease since a 0.1% dip in September, 1988, and the largest drop since a 1.4% decrease in January, 1987.

The October report showed that Americans’ incomes after taxes also rose 0.9%, up from September’s 0.2% gain.

Americans’ savings rate, savings as a percentage of disposable income, rose to 5.7%, the highest since a 5.8% rate last June and up from September’s 4.7%.

The key component of the income category, wages and salaries, rose $33 billion last month after a gain of $17 billion in September.

Payrolls at manufacturing companies rose by $6.8 billion, up from a September gain of $300 million.

Personal incomes totaled $4.51 trillion at an annual rate in October, compared with $4.47 trillion in the previous month.

On the spending side, the $6.1-billion decrease in personal consumption spending, which includes everything except interest payments on debt, contrasted with a $9.9-billion gain in September when auto sales were rising.

Purchases of durable goods--big-ticket items expected to last more than three years--dropped $28.2 billion, while purchases of non-durable goods edged up $2.5 billion. Spending on services rose $20.2 billion.