Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 3, 1994 TAG: 9403030037
SECTION: BUSINESS PAGE: C-9 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
But the Commerce Department also reported Wednesday that consumer spending rose for the 10th straight month, at a rate that matched December's increase.
Economists said the signs point to slower economic growth, although Mother Nature is making matters look worse than they are.
"I think after you brush all the disasters aside, the economy is still generating a fair amount of income," said Sandra Shaber, an economist with the WEFA Group outside of Philadelphia.
She noted that the most important component of the income category - wages and salaries - actually rose 1 percent in January to $3.19 trillion.
The overall income dip is misleading because it was based on unusual factors and "doesn't reflect fewer dollars in people's pockets," said Mark Vitner, economist for First Union Corp. in Charlotte, N.C.
The Commerce Department said consumer spending, which represents two-thirds of the nation's economic activity, rose 0.5 percent, led by a 0.9 percent jump for spending on services.
Spending on big-ticket items such as cars and appliances rose to 0.3 percent and spending on nondurable goods such as food and fuel edged up 0.1 percent.
All spending rose to a seasonally adjusted annual rate of $4.53 trillion, from $4.51 trillion in December.
"Consumers seem determined to spend despite the severe winter weather," said Donald Straszheim of Merrill Lynch & Co.
Americans' income dropped after five straight increases, declining 0.3 percent in January to $5.53 trillion at a seasonally adjusted annual rate. Income, which rose 0.6 percent in December, last fell in July - 0.2 percent.
The January decline was the largest since a 5.1 percent drop in January 1993, which reflected the previous month's large bonus payments to employees.
But the Los Angeles earthquake skewed this January's figures, causing $42.5 billion in uninsured losses, including $29.9 billion in lost rent from residential property.
A dip in subsidies to farmers and an increase in Social Security payments to the government accounted for the rest of the decrease, the Commerce Department said.
Without those unusual factors, which are not likely to recur, personal income in January would have risen 0.7 percent.
In another report, sales of new homes plunged 20.1 percent in January, the steepest decline in nearly 14 years, because of the bad weather and rising interest rates.
Also, the Commerce Department said the U.S. merchandise trade deficit in 1993 shot up 37.9 percent, to $132.5 billion, the largest since a $159.6 billion gap in 1987.
Most analysts expect economic growth to slow this year after a sizzling final three months of 1993. The government reported Tuesday that the economy grew at a 7.5 percent annual rate in last year's final quarter.
by CNB