America spent more
with same income
WASHINGTON (AP) — Americans' income stagnated in April. but
they tapp'd their savings and spent generously anyway , according to
government figures released Tuesday.
Incomes were unchanged at n seasonally adjusted annual rate of
$5 26 trillion, breaking a string of four consec utive increases, the Com
men e Department said. They had ris«>n 0.6 percent in March
Meanwhile, personal consumption spending jumped t pen ent to
a seasonally adjusted annual rate of S4 28 trillion It was the strongest
increase in six months. A month earlier, spending had fallen 0.2 per
cent, depressed by the mid-March blizzard that hit the hast Coast
"It's a very simple story. People spent a lot of money in April but
they didn't get any." said economist David Wyss of DRI-Mi Grow Hill,
n Lexington. Mass., forecasting firm.
The combination produced the lowest savings rate — savings as a
percentage of income — in five months. It was 4 3 perc ent in April,
down from 5.3 percent the month fas fore.
Wyss and other economists warned that consumers can't outspend
their income indefinitely and predicted spending would lapse unless
employers start hiring faster. The nation's unemployment rate has
remained stuck at 7 percent since February
"We're just not seeing income gains. People arc* doing their best
to keep up their spending, but with the savings rate now clown to 4 1
percent, it's going to lie darn hard to spend more." Wyss said
Two other reports issued Monday also depicted a struggling econ
omy.
• An index of manufacturing activity grew modestly in May. to 5 I 1
percent from 49.7 percent, the National Assoc lation of Puri basing
Management said However, a suhindex on employment fell to the
lowest level in 16 months, to 4 14 pen ent in May from 44 -I percent
a month earlier. A reading below 48 in the stihindex is generally asset
i Kited with dec:lining factory employment.
•The Commerce Department said construction spending unex
pectedly failed to rebound in April from severe winter weather in
March Spending fell 0.4 percent in April following a 0.1 perc ent
decline in March. Increases in government and com mere ial con
struction were not enough to offset a dec line in home building
Most analysts expect economic, growth, which registered an ane
mic: 0.9 perc ent annual rate during the first three months of this year,
will improve to about a 3 percent rale during the second half.
But they said that forecast is endangered by the taxes in Presi
dent Bill Clinton's deficit reduction plan and expected in his health
care package. Also, if Congress gives Clinton less deficit-reduction
than he requested, it < mild send long-term interest rates higher, hir
tlier dampening growth, they said.
"1 see more and more uncertainty now Businesses don t want to
hire people because they don’t know what's going to happen. I he
plans are for higher taxes and there's nothing there to promote job
growth and now the deficit-reduction is in question as well, said
e< onomist Fveltna Tainer of Prime l < onomic t (insulting in Chicago
In April, the most-watched component ol income — wages and
salaries — rose a modest 0.3 percent to $3.01 trillion It had been
unchanged in Marc h and down 0.2 pen ent in February
Government transfer payments, such as unemployment benefits,
increased in April. Business owners income rose, lent interest income
declined.
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