THE ECONOMY : Income Rises as Consumer Spending Slows

Americans started the 1990s with a healthy 0.8% rise in personal income in January, while growth in consumer spending slowed and a trend toward greater savings continued, the Commerce Department said Thursday.

Personal income, which includes wages, salaries, interest, dividends and other items, rose a more modest 0.5% in December and stood at a $4.60-trillion annual rate in January.

Consumer spending, meanwhile, rose more slowly than income, climbing 0.6% to a $3.60-trillion annual rate after a 1.0% rise in December, the department said.

Most of the spending gain was for durable goods--”big-ticket” items such as cars and appliances--which soared 5.2% in January, the department said. Spending on services declined slightly.

Despite January’s rise in spending, which was largely the result of a one-month surge in car sales, economists said consumers appear to be curbing their outlays, which could slow the economy. Consumer spending accounts for about two-thirds of gross national product, the broadest measure of domestic economic activity.

“I would expect weak GNP growth in the first quarter,” said economist Kathryn Kobe at Joel Popkin & Co. in Washington.

Federal Reserve Board Chairman Alan Greenspan recently told Congress that the worst of the economic slowdown was over.

But the National Assn. of Purchasing Management said Thursday that the manufacturing sector of the economy continued to contract in February, though not as steeply as in previous months.

Tax payments in January were reduced because of the annual “indexing” of federal income tax rates to inflation.

But income was also held down by an $8.8-billion increase in social security tax payments, reflecting a rate increase, said Lawrence Hunter, a U.S. Chamber of Commerce economist.

“It may be a kinder, gentler, no-new-taxes world in the rhetoric of politicians, but in the real world it is proving to be nasty and harsh on the income of American taxpayers,” he said.

With tax payments down and income up, consumers’ disposable, or after-tax, income rose 0.9% in January to a $3.93-trillion rate after a modest 0.4% gain in December.

Consumers continued saving their money at an increasing rate, the department said. They put 5.9% of their disposable income into savings in January after saving 5.5% in December, it said.

The savings rate has been climbing steadily from a 40-year low of 3.2% in 1987 to 4.2% in 1988 and 5.5% last year.

Many economists say the rate must return to its long-term average of about 6% to ease upward pressure on interest rates and stimulate business investment.

Economists said an increasingly cautious, aging population, startled by the 1987 stock market crash and declines in real estate values, is likely to continue to put more of its money into savings.

“We are seeing an increase in the savings rate--and one would have to say it’s about time,” said Popkin’s Kobe. “Baby boomers are moving into an age group which tends to save more than younger people.”

The January increase in personal income included an $11.3-billion rise in private wages and salaries, all of which was in service and retail industries. Manufacturing payrolls declined in January, while government payrolls increased.

PERSONAL INCOME Trillions of dollars seasonally adjusted Jan., ‘90: 4.60 Dec., ‘89: 4.57 Jan., ‘89: 4.27 Source: Commerce Department PERSONAL SPENDING, Los Angeles Times Trillions of dollars seasonally adjusted Jan., ‘90: 3.60 Dec., ‘89: 3.58 Jan., ‘89: 3.37 Source: Commerce Department