Meager increases in income, spending signal weak rebound

June 27, 1992|By Alan Zimmerman | Alan Zimmerman,Knight-Ridder Financial News

NEW YORK -- The meager gains in May personal income and spending again affirm that the U.S. economic recovery continues at a slow pace, economists said yesterday.

Personal income rose 0.3 percent to a seasonally adjusted annual rate of $5.008 trillion in May, up from April's 0.1 percent increase. It was the fourth consecutive monthly gain, the Commerce Department said. Personal spending rose 0.5 percent to an annual rate of $4.062 trillion, near forecasts, up from last month's revised 0.4 percent gain.

"The modest gains indicate income growth is stagnating in the second quarter, while the gains in spending were largely in autos and durables, represented dips into savings, and confirm the struggling nature of the recovery," economist William Sullivan of Dean Witter Reynolds Inc. said.

"We're not in recession, but we're moving very slowly," Mr. Sullivan said. "Consumption depends on income, and income gains are pretty weak for the early stages of the recovery."

"This is just telling you there's a little bit more money, but not enough to fuel a real consumer-led recovery," economist Michael Casey at Maria Ramirez Capital Consultants Inc. said.

"This is a relatively slow-growth" report, Mr. Casey said. Economist Paul Lally at R. H. Wrightson & Associates agreed.

"The numbers say what everybody had believed coming out of the recession: that the expansion is going to be really mild," Mr. Lally said.

"The income growth is enough to sustain the current level of consumption, but not enough to lead to an extraordinary rise in consumption."

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