Americans’ Incomes Up; Spending Strong

Americans’ personal income increased solidly in May, and they spent their money robustly, government figures showed Friday. But in a hint of spillover from Asia’s economic turmoil, factory wages stagnated.

Incomes increased 0.5% to a seasonally adjusted annual rate of $7.22 trillion, reflecting gains in every category of income except manufacturing pay, the Commerce Department said.

Wages and salaries, which account for more than half of Americans’ income, rose 0.6%, reflecting the lowest unemployment rate, at 4.3%, in 28 years.

But service business wages--up 1.1%--and distributive industries--up 0.8%--did far better than manufacturing, which has been hurt by a slump in export sales to Asia and by competition domestically from cheaper imports. Factory wages rose less than 0.1% after declining the month before.

“The economy is caught between two conflicting forces right now. There’s the rip-roaring strength of domestic income growth, and there’s the contagious weakness of Asia,” said economist Everett Ehrlich of ESC Co. in Washington.

Also rising were business owners’ income, farmers’ income, transfer payments such as Social Security, rental income, dividends and interest.

Analysts said the report showed the U.S. economy remained on a firm growth track, less robust than the first quarter’s unsustainably strong 5.4% annual rate of gross domestic product expansion but anchored by firm domestic demand.

A separate confirmation of the consumer sector’s buoyancy came from a June survey of consumer confidence compiled by the University of Michigan. Despite a slight dip in its index of consumer sentiment to 105.6 from 106.5 in May, the index’s current conditions component was stronger.

Personal consumption expenditures rose a bit faster than income in May--up 0.6%, to a seasonally adjusted annual rate of $5.75 trillion.

The pattern has been consistent through the year. That has reduced the nation’s savings rate from 4% of disposable, or after-tax, income in December to a 10-month low of 3.5% in May.

Americans’ spending in May rose most strongly for durable goods--expensive items from cars to computers expected to last three years or longer. It increased 2.9%, the most in 10 months.

Spending rose 0.4% for nondurable goods and 0.3% for services.

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Associated Press and Reuters were used in compiling this report.