Income grew 0.5% in October Personal spending also showed increase in government report

'Very healthy' situation

Gains, low inflation seen moving consumers to buy during holidays


November 29, 1997|By BLOOMBERG NEWS

WASHINGTON -- U.S. personal income and spending posted healthy gains in October, a sign consumers will open their wallets during the Christmas shopping rush, government figures showed yesterday.

"We think it's going to be a great year," said John Reilly, a spokesman for Pittsfield, Mass.-based K-B Toys, a unit of Consolidated Stores Corp.

Incomes rose 0.5 percent in October -- the 12th straight monthly gain -- after climbing 0.3 percent in September, Commerce Department figures showed. Previously, the government estimated that personal income rose 0.4 percent in September.

Spending, meanwhile, rose a greater-than-expected 0.5 percent in October, after increasing 0.3 percent in September, previously reported as a 0.2 percent gain.

Low inflation and discounting "gives consumers the incentive to go out there and shop," said John Konarski, vice president of research for the International Council of Shopping Centers, in Jersey City, N.J.

Stocks and bonds rose yesterday as the report gave investors no reason to expect the economy is departing from its path of steady, low-inflation growth. The Treasury's benchmark 30-year bond rose 1/8 , pushing down its yield a basis point to 6.04 percent, in an abbreviated post-Thanksgiving session. The Dow Jones industrial average rose 28.35 points, or 0.36 percent, to close at 7,823.13.

Average hourly earnings increased in October by 0.5 percent -- or 6 cents -- to $12.41, as businesses contended with labor shortages in many industries by offering higher wages.

Changes in income can foreshadow future business activity because they indicate how much consumers will be able to spend. Consumer spending accounts for roughly two-thirds of the nation's output of goods and services.

Analysts don't expect growth in the final three months of the year to top the gain of 3.3 percent annual rate posted in the third quarter. Still, the economy is "very healthy," said Kim Rupert, senior economist at Standard & Poor's MMS in Belmont, Calif. "The good income gains have been an underlying factor supporting growth, and have been consistent with the entire scenario that the economy remains very healthy."

Also in yesterday's income and spending report, the Commerce Department said:

U.S. consumers' disposable income, or the money left over after taxes, increased 0.5 percent in October after rising 0.3 percent during September.

The personal savings rate held steady at 3.6 percent in October for the third straight month.

Interest payments to businesses -- counted separately from overall spending figures -- increased by 0.6 percent during October after rising 0.9 percent in September.

Pub Date: 11/29/97

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