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Personal income grows
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October 1, 1999: 10:06 a.m. ET
August 0.5% gain tops forecast of 0.4% increase; consumption up 0.9%
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NEW YORK (CNNfn) - Americans' personal income and spending rose at a faster-than-expected pace in August, while the savings rate fell further, the government reported Friday -- a possible cause of concern when the Federal Reserve meets next week.
Personal income rose 0.5 percent, the Commerce Department said, while spending jumped 0.9 percent to an annual rate of $6.25 trillion, exceeding analysts' estimates and the gains reported in July.
"It's not really a surprise," Maureen Allyn, chief economist at Scudder Kemper Investments told CNNfn, since August car sales were a record.
"How long can we go on spending more than we earn?" Allyn asked. "It's got to cause the Fed some worry."
The personal savings rate was negative 1.5 percent, deeper than the revised negative 1.3 percent rate in July. It was the ninth straight month of a negative rate, which indicates that people are dipping into their savings.
Analysts said markets would hunker down ahead of Tuesday's meeting of the Federal Reserve's rate-setting panel, the Federal Open Market Committee. The central bank has raised rates twice this year.
"I think today the market is totally going to prepare itself for the FOMC meeting and take its cue from the numbers," Peter Cardillo, director of research at Westfalia Investments.
Bond prices fell on the news. The U.S. 30-year bond slid 30/32, raising the yield to 6.11 percent from 6.04 percent late Thursday.
Release of the monthly data was complicated by an early-morning fire that forced the closing of the huge downtown building where the report is normally issued under tight security. A Commerce Department employee ran several blocks to deliver copies of the report to reporters waiting at the nearby Treasury Department.
Major automakers reported earlier that August sales of cars and light trucks climbed to an annual rate of 17.8 million from 17.1 million in July.
-- staff and wire reports
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Commerce Department
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