Income Edges Up Sluggishly in February : Economy: Spending increases 0.6%, but about a third of the rise was attributed to extra spending for utility use.

Personal income grew by a lackluster 0.2% last month, forcing Americans to dip into savings to pay utility bills during the fifth coldest February on record, the government said Monday.

The weather also held back a rebound in new home sales.

Restrained by several special factors in addition to the weather, income rose to a seasonally adjusted annual rate of $5.23 trillion, after a stronger 0.5% gain in January, the Commerce Department said.

Spending increased 0.6% in February to a seasonally adjusted $4.26 trillion, after a 0.3% advance in January. But about a third of the rise was attributed to extra spending on heat.

“There’s a lot of distortions, but the basic trend is income and spending are rising moderately, but not rapidly, right now,” said economist Bruce Steinberg of Merrill Lynch.

In another report, the department said sales of new homes rose 4.6% in February to a seasonally adjusted annual rate of 595,000 units. Sales had slumped 12.7% in January, the worst in a decade, and analysts had been looking for a 6% rebound in February.

Both reports point to continued economic expansion, but at a somewhat slower pace than during the fourth quarter of last year, when consumers went on a holiday shopping spree, economists said.

“The consumer did an awful lot in the fourth quarter, and it was too much to think it would continue in this quarter. A temporary hiatus was very much expected,” said economist Robert G. Dederick of Northern Trust Co. in Chicago.

The gross domestic product, the sum of all goods and services produced within U.S. borders, advanced at a brisk 4.7% annual rate during the fourth quarter, the best showing in five years.

Both Dederick and Steinberg believe that the growth rate slowed to about 3% in the first quarter.

“Compared to the recent past, that’s not bad. Compared to a normal recovery, it’s not much,” Steinberg said.

Economists are warning that unless there is more robust job and income growth, consumer spending--which represents two-thirds of the overall economy--will fade.

Because spending grew faster than income in February, the savings rate--savings as a percentage of income--fell to 4.1% in February, the lowest since October, 1990. It was 4.4% in January and December.

A number of special factors dampened income growth in February, compared to the month before. Among them, bonus payments to employees of brokerage firms and retirement incentives to postal workers were made in January, but not February.

But federal farm subsidies boosted income in February.

Excluding the special factors, income would have risen 0.5% in both February and January.

Personal Income:

Trillions of dollars, seasonally adjusted annual rate

Feb., ‘93: 5.22 Jan., ‘93: 5.22 Feb., ‘92: 4.99

Personal Spending:

Trillions of dollars, seasonally adjusted annual rate

Feb., ‘93: 4.26 Jan., ‘93: 4.24 Feb., ‘92: 4.03 Source: Commerce Department