Personal Incomes Rebound in August

U.S. wages, salaries and other personal incomes rebounded in August, while spending increased for a third straight month, albeit at a slower pace than in July, according to data reported Monday.

Despite downbeat reports recently from big retailers, many economists say overall consumer spending should hold up in coming months.

Incomes rose 0.4% in August after no change in July, the Commerce Department said. Consumer spending on goods and services rose 0.3% after a 1% jump in July, the report said.

Personal incomes are 3.5% higher than they were a year ago, giving consumers the wherewithal to spend, analysts said. That’s vital for a sustainable recovery because spending accounts for two-thirds of the economy.

Disposable income, or the money left over after taxes, increased 0.4% in August, twice the July rise.

The personal savings rate rose to 3.6% in August from 3.5% in July. The figure includes current income from wages, salaries, businesses and government payments.

Home refinancing is providing extra spending money as homeowners take advantage of falling mortgage rates, analysts said.

Spending on durable goods such as autos and appliances rose 1.4% in August after surging 5.2% the month before, Monday’s report showed. But spending in other areas barely grew. Spending on nondurable goods rose 0.2% after increasing 0.3% in July; spending on services rose 0.2% after jumping 0.6% in July.

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The National Assn. for Business Economics, releasing the latest forecast by a panel of 32 of its members, said Monday that it expected the economy to grow by 2.4% this year and 3.2% in 2003. The group said its forecasting panel saw little threat of a new recession.

“Economic growth may not be supercharged, but it is solidly positive,” said Tim O’Neill, economist at Harris Bank in Chicago and incoming president of the group.