Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, October 1, 1994 TAG: 9410030052
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
SOURCE: Knight-Ridder/Tribune
DATELINE: NEW YORK LENGTH: Medium
The report from the Commerce Department ``basically proves the consumer is spending his little heart out and argues this economy isn't slowing as fast as we thought it was,'' said David Wyss, chief financial economist at DRI/McGraw-Hill Inc.
Personal spending surged to its biggest gain in six months. Spending climbed to an annual rate of $4.667 trillion in August after a revised 0.3 percent rise in July.
August personal income rose 0.4 percent to a seasonally adjusted annual rate of $5.727 trillion, after rising 0.5 percent in July.
The increase in August spending was just slightly above the median forecast for a 0.8 percent gain. It follows a revised 0.3 percent gain in July, which was originally reported as a 0.2 percent increase. The income statistics were less impressive, with August personal income up 0.4 percent, slightly above the consensus forecast for a 0.3 percent gain.
Joan Schneider, a money market economist at BA Securities Inc., said the continuing gains in spending are ``all in line with a story that the economy keeps expanding through early next year at a reasonable rate.''
As expected, much of the gain in August spending came in durable goods, which jumped 3.9 percent, reflecting last month's surge in auto sales. Car and light-truck sales jumped to a 12.9-million-unit annual rate in August, from the 11.5-million-unit rate seen in July.
But economists pointed out that consumers also were spending on nondurable goods, which rose 0.5 percent in August, and on services, which were up 0.4 percent.
The spending numbers are ``strong across the board, it's not just autos,'' said Joel Naroff, chief economist at First Fidelity Bancorp. in Philadelphia.
Wyss expects the gross domestic product to grow about 2.5 percent in the third quarter, then do a little better in the fourth quarter thanks to the strength in autos.
Wyss added that the strength in August spending was a good omen for Christmas sales.
Analysts said, though, that the disparity between income and spending evident in Friday's statistics is a factor that could force consumers to slow down in coming months.
``In the last three months, consumers haven't been adding to savings at all,'' Naroff said. ``How long can we continue to do that?''
by CNB