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

DATE: TUESDAY, October 3, 1995                   TAG: 9510030074
SECTION: BUSINESS                    PAGE: B7   EDITION: METRO 
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON                                 LENGTH: Medium

CONSUMER SPENDING SOARS, BUT BOOM COULD BE BRIEF

Consumer spending shot up in August at the fastest pace in three months as Americans flocked to auto showrooms to take advantage of steep discounts. But incomes were unchanged, prompting speculation the boom may be brief.

The Commerce Department said Monday that consumer spending, which accounts for about two-thirds of the nation's economic activity, rose a robust 1 percent in August. Analysts said the surge was caused largely by sales of cars.

Private wages and salaries actually fell.

Analysts said consumers, already burdened by heavy debt, used savings to help finance their purchases. The savings rate - savings as a percentage of income after taxes - fell to 3.6 percent, from 4.5 percent in July.

``The pace of consumption spending during the summer is unsustainable, unless there are substantial gains in incomes,'' said economist Gordon Richards of the National Association of Manufacturers.

Some analysts said income growth and a slower advance in spending could mean healthy economic expansion for the remainder of the year.

``I'm in the camp that says that the end of this year will be pretty solid,'' said banking economist David Orr of First Union Corp. in Charlotte, N.C. ``But it won't carry through to next year.''

``The spending growth rate will come down,'' said economist Elliott Platt of Donaldson, Lufkin and Jenrette Securities Corp. in New York. ``The economy is very much on a soft-landing trajectory.''

Income was at $6.06 trillion at a seasonally adjusted annual rate in August, and spending rose to $4.93 trillion.

Private wages and salaries, the most closely watched component of income, declined at a $7.1 billion annual rate in August, compared with a $26.6 billion gain the previous month. Service industry payrolls fell $7.2 billion, compared with an increase of $16.2 billion in July.

Government wages and salaries rose at a $1.7 billion rate in August, compared with $6 billion a month earlier.

Outlays for big-ticket durable goods such as cars and appliances rose 5.4 percent to a seasonally adjusted annual rate of $647 billion. Spending on non-durable goods, such as food and fuel, fell 0.1 percent to $1.45 trillion. Spending on services rose 0.6 percent to $2.829 trillion.

The Commerce Department also reported that construction spending fell 0.2 percent in August - the first decline in three months - after hitting a record high in July. But single-family home building rose for the second straight month as mortgage rates remained favorable.

by CNB