Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, March 28, 1992                   TAG: 9203280063
SECTION: BUSINESS                    PAGE: A-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

WE EARNED MORE, SPENT MORE

Personal incomes shot up 1.1 percent in February, the biggest leap in three years, the government said Friday.

The gain helped support a 0.9 percent increase in the consumer spending that will be crucial to any economic upturn.

"The consumer will be the main engine" for the rebound, said economist David Wyss of DRI-McGraw-Hill, a Lexington, Mass., forecasting service.

"This was largely a consumer recession," he said. "It will have to be a consumer-led recovery, and that is what we have been seeing since Christmas."

February's strong figures "may overstate the underlying strength of the economy . . . but there is an indication that the recovery process is under way," said economist Lynn Reaser of First Interstate Bancorp of Los Angeles.

Noting that consumer spending accounts for two-thirds of the nation's economic activity, White House spokesman Marlin Fitzwater said the gains "represented a significant positive contribution" to overall growth.

Spending rose 0.9 percent in both February and January, the sharpest gains since back-to-back advances at the same pace in February and March last year, the Commerce Department said.

Spending totaled $4.03 trillion at a seasonally adjusted annual rate last month, up from $3.99 trillion in January.

"The increase in spending is critical because there had been a buildup of inventories last year," Reaser said. "That had caused a reduction in orders from factories and a cut in production. That seems to be reversing now."

The report also shows Americans' incomes reached a seasonally adjusted annual rate of $4.97 trillion last month, up from $4.92 trillion in January. The increase was the largest since a 1.3 percent advance in January 1989.

The report said income growth was driven by a $33.2 billion jump in wages and salaries, an increase in farm subsidies and a speedup of life insurance dividends to veterans.

The 1.5 percent advance in wages and salaries, excluding government payrolls, was the biggest since a 1.7 percent gain in December 1987. The Labor Department had reported earlier that 164,000 new jobs were created in February and the average work week increased by 0.4 hour.

Disposable incomes - incomes after taxes - rose 1 percent after slipping 0.1 percent a month earlier.

Americans' savings rate - savings as a percentage of disposable income - rose to 4.7 percent in February, up from 4.6 percent a month earlier but down from 5.6 percent in December.

When government payrolls are included, wages and salaries jumped $36.1 billion, more than wiping out the $16.9 billion loss in January.

The income and spending figures were not adjusted for inflation. When adjusted, disposable incomes rose 0.7 percent after falling 0.2 percent in January. Inflation-adjusted consumer spending grew 0.6 percent in February, slightly slower than the revised 0.9 percent advance a month earlier.