Washington, DC, Sept. 30—According to the Commerce Department, personal consumption spending rose by only 0.3% in August following a 1% surge in July.
Americans'''' income growth, however, picked up a bit in August, rising by 0.4% after making no advance in July. In June, incomes had risen by 0.7%.
The 0.3% increase in spending was even slower than the 0.5% increase that many economists had forecast.
The overall U.S. economy, which was hit by the first recession in a decade last year, has been growing in fits and starts this year. Economic growth, as measured by the gross domestic product, rebounded at a 5% rate in the first three months of the year only to slow to a 1.3% rate in the second quarter.
Analysts are looking for that pattern to continue, with growth in the third quarter expected to come it at 4% or better before tailing off in the final three months of this year.
The slowdown is being predicted because of a belief that the consumer, who has been buying new cars and homes at record levels this year, will trim spending in coming months because of rising uncertainty about the future.
A new wave of layoff notices was issued in recent weeks as corporations continued to struggle with weaker than expected profits. The stock market, which had been roiled by corporate accounting scandals earlier in the year, has been hitting new lows in recent weeks in part because of anxieties over about what a possible U.S. war in Iraq will do to oil prices and the overall economy.
The Federal Reserve passed up the chance to cut interest rates last week, leaving them at 1.75%. But analysts said there is a growing possibility the Fed will cut rates because of all the turmoil to guarantee the country doesn''''t go into a double dip recession.
The 0.4% rise in Americans'''' incomes in August was right in line with analysts'''' expectations. Disposable incomes rose by 0.4% in August, double the 0.2% gain in July.
The increase in disposable income and the slowdown in spending meant that Americans'''' savings rates edged up a bit to 3.6% in August compared to 3.5% in July.
On the spending side, the biggest gain occurred in demand for durable goods, a 1.4% increase, reflecting brisk car sales this summer as consumers responded to zero interest financing offers and strong home sales.
The housing industry has been a bright spot for the economy as consumers responded to the lowest mortgage rates in decades. A national survey by Freddie Mac reported that 30 year mortgage rates dipped to 5.99% last week, the lowest level in the more than three decades that the mortgage company has been doing its survey.
Spending on nondurable goods was up 0.2% in August and spending on services, which includes rent payments, also rose by 0.2%.
