|
Income, spending surge
|
 |
November 26, 1999: 10:56 a.m. ET
One-time factors contribute to 1.3% rise in October income; spending up 0.6%
|
NEW YORK (CNNfn) - Americans' income levels posted the biggest monthly jump in 5-1/2 years, bolstered by one-time gains from farm subsidies and union signing bonuses, the government reported Friday. Spending, meantime, advanced at the fastest pace since August.
Income rose 1.3 percent in October, up from a flat reading in September and more than double the 0.6-percent gain that was anticipated. It was the biggest gain since a 1.3-percent jump in April 1994. Spending, meantime, gained 0.6 percent, above the revised 0.5 percent pace registered in September and the 0.3 percent increase expected by economists.
Incomes were boosted by several factors, including an increase in government farm subsidies, union contract signing bonuses, and a bounceback in rental incomes from a September setback caused by Hurricane Floyd, the Commerce Department said. Excluding the one-time effects, personal income rose 0.5 percent last month.
Soft-landing scenario?
"All in all, the year-over-year trend in income jumped to 6.1 percent from 5.4 percent, suggesting that consumer fundamentals remain very strong," said Sherry Cooper, chief economist at Nesbitt Burns Inc. "Consumer spending remains on a tear."
Analysts and investors have been poring over economic releases searching for evidence that the U.S. economy -- about to enter its ninth year of uninterrupted expansion -- is beginning to slow, easing the threat of accelerating inflation.
Two big concerns for economists of late have been the possibility of rising wage levels as the pool of available workers continues to decline and the pace those workers' spending, particularly as the holiday shopping season heats up.
Those concerns became particularly pronounced after the Federal Reserve raised short-term interest rates by a quarter point earlier this month. In a statement accompanying the rate hike, the Fed made specific reference to the tight labor market, something it normally does not do.
Income gains usually translate into increased spending, which accounts for about two-thirds of the nation's output of goods and services.
Taken in stride
Because of the one-time factors, financial markets took the numbers as a sign that neither income nor spending is advancing at a pace that will lead to a substantial rise in inflation. Stocks rose in early trade, while the benchmark 30-year bond recovered earlier losses.
"These data provide additional evidence that a soft-landing scenario is beginning to unfold, much to the (Federal Open Market Committee's) delight," said Steven Wood, an economist at Banc of America Securities in San Francisco.
On the consumption side, October's increase reflected a 0.5 percent gain in spending on non-durable goods, a 0.6 percent increase on spending for durable goods and a 0.8 percent rise in spending on services. The increase for services was the largest since a 0.9 percent gain in March.
Disposable income, or money left over after taxes, rose 1.4 percent in October after falling 0.2 percent in September. The personal savings rate, meantime, gained 2.3 percent in October, above the 1.5 percent rate recorded the previous month.
|
|
|
|
|
|
Commerce Department
|
Note: Pages will open in a new browser window
External sites are not endorsed by CNNmoney
|
|
|
|
 |
|
