Personal Income Dips for Second Month : Economy: July’s 0.2% decline is the first back-to-back drop since 1954. Floods and drought are blamed.

Floods and drought cost Americans some of their income in July, but they continued to spend modestly. In other signs of a slow economy, construction spending declined while mortgage delinquencies rose.

The Commerce Department reported Wednesday that personal incomes slipped 0.2% to a seasonally adjusted annual rate of $5.37 trillion, down from a revised $5.38 trillion in June, when they fell 0.1%. It was the first back-to-back drop since 1954. Incomes in June originally were estimated to be unchanged.

But the report attributed much of the July decline to Midwestern floods, which damaged both residential and business property and shrank rental incomes, and to the Southeastern drought, which reduced crops and farm income.

In fact, a key component of the income category--wages and salaries--actually rose $20 billion in July after falling $7.5 billion a month earlier.

“Stripping out the obvious distortions related to the flood and drought, there looks to have been a moderate increase of about half a point,” said economist Stephen S. Roach of Morgan Stanley & Co.

The report also shows that consumer spending rose 0.4% to a $4.40-trillion seasonally adjusted annual rate, up from $4.38 trillion a month earlier.

It was the fourth straight increase, which has worried some analysts who fear that spending is not being adequately supported by growth in incomes.

“The consumer is being stretched here,” Roach said.

Consumer spending represents two-thirds of the nation’s economic activity. It grew at a 3.2% annual rate from April through June, the government said Tuesday, helping boost economic growth at a 1.8% annual rate during the second quarter.

In a second report, the Commerce Department said construction spending fell 0.5% in July, the first decline in three months. But the drop was due to a 5.6% decrease in private non-residential outlays. Both private residential and government spending rose, 0.3% and 2%, respectively.

Overall, construction outlays totaled $458.2 billion at a seasonally adjusted annual rate, down from $460.5 billion in June. Still, spending so far this year is 6.1% above that of the same period of 1992.

Meanwhile, the Mortgage Bankers Assn. released its latest mortgage delinquency survey, showing that past-due payments in the second quarter edged up to 4.39% from 4.29% in the January-March period.

Delinquencies in both FHA and VA loans were up sharply to 7.43% from 6.89%, and to 6.57% from 6.24%, respectively. The amount of past-due conventional loans remained at 2.74%.

In yet another report, the National Assn. of Purchasing Management reported that its August index fell to a reading of 49.3% from 49.5% in July. A figure below 50% indicates the manufacturing sector is declining.

However, a reading above 44.5% usually means the overall economy is growing. With the index averaging 51.9% this year, the economy appears to be continuing its slow climb back from recession.

NAPM’s measure of employment also shrank in August at a faster pace than it had in July because only a few industries were hiring.

In its income report, the Commerce Department said disposable incomes--incomes after taxes--declined 0.3% following a 0.1% drop in June.

Income Down, Spending Up

Personal Income--Trillions of dollars, seasonally adjusted annual rate:

July, 1993: $5.37

Personal Spending--Trillions of dollars seasonally adjusted annual rate:

July, 1993: $4.40