Incomes Up at Year-End, but Manufacturing Slows

Consumers’ incomes rose sharply as 1996 ended, the government said Monday, but industry was tempering hopes for economic growth in 1997 amid signs that manufacturing was slowing.

The Commerce Department said incomes from wages, salaries and all other sources rose 0.8% in December to a seasonally adjusted annual rate of $6.64 trillion after rising 0.6% in November.

Personal incomes rose a solid 5.5% for all of 1996, though that was down from the 6.3% rise in 1995.

Spending on all types of goods and services increased 0.5% to a $5.27-trillion rate following a 0.4% rise in November, the department said. Consumer spending fuels about two-thirds of the nation’s economy.

Separately, the National Assn. of Purchasing Management said its index of manufacturing activity fell to 52.0 in January from a revised 53.8 in December. A reading above 50 signals growth, while one under that level points to contraction.

“Purchasing executives’ comments on business conditions in January were less optimistic than in December, with many members describing business conditions as stable,” said Norbert Ore, chairman of NAPM’s Business Survey Committee and director of purchasing at Sonoco Products Co.

The group of purchasing executives, who buy wholesale supplies for factories, said manufacturing jobs fell for the 23rd straight month, but not as rapidly as they did in November, while new orders weakened and prices edged higher.

The reports helped to ease inflationary fears on Wall Street, where bond prices rose. Stocks were mixed.

The reports came just before Federal Reserve Board policymakers meet today and Wednesday to plot interest rate strategy. Analysts expect the central bankers to hold rates steady amid signs of solid economic growth but virtually no inflation.

Prices have remained well in check despite a pickup in growth in the fourth quarter, to a 4.7% annual rate from 2.1% in the third quarter.

In its report, the Commerce Department said more jobs helped boost December incomes.

“In December, employment, average weekly hours and average hourly earnings all increased,” the department said.

Savings rose to 5.4 cents per dollar earned in December from 5.1 cents in November.

The department also said spending on new construction fell in December for the first time in five months as government and private industry trimmed back on building projects.

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Personal Income and Spending

Trillions of dollars, seasonally adjusted annual rates:

Dec. income: 6.64

Dec. spending: 5.27

Source: Commerce Department