Consumer Spending, Income Rise Sharply

Consumer spending rose 7.3% in 1989, its fastest pace in three years, while personal income jumped 9%, the largest increase in five years, the government said Monday.

The Commerce Department said spending totaled $3.58 trillion last year, posting the largest gain since a 6.1% advance in 1986.

Consumer spending is considered a barometer of economic health because it accounts for about two-thirds of the nation’s economic activity. The department reported last Friday that spending posted a rare decline of 0.1% during the entire fourth quarter of 1989.

Income totaled $4.43 trillion last year; its 9% rise marked the sharpest jump since a 9.5% increase in 1984.

Americans’ savings rate, savings as a percent of disposable income, rose to 5.5% from a 4.2% rate in 1988. It was the highest rate since the 6.1% posted in 1984.

On a monthly basis, spending rose 1% to a seasonally adjusted annual rate of $3.58 trillion in December, the smallest increase since a 1% advance last August.

Income, however, edged up just 0.5% to a seasonally adjusted annual rate of $4.57 trillion, the smallest increase since a 0.2% gain last September.

The unusually cold weather contributed to the December jump in spending. Expenditures for fuel oil, electricity and natural gas increased $15.1 billion following a 3.1% increase in November.

Purchases of durable goods--big-ticket items expected to last more than three years--rose $6.7 billion after declining $2.8 billion the previous month. Non-durable purchases gained $6.2 billion after a $3.4-billion November increase. Spending on services increased $24.1 billion following a $9.6-billion advance the previous month.

The December report showed that Americans’ income after taxes rose 0.4%, after a 1% gain in November.

PERSONAL SPENDING

Trillions of dollars, seasonally adjusted. Dec.,’89: 3.58. Nov.,’89: 3.54. Dec.,’88: 3.34

PERSONAL INCOME

Trillions of dollars, seasonally adjusted. Dec.,’89: 4.57. Nov.,’89: 4.55. Dec.,’88: 4.21