
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, July 31, 1993                   TAG: 9307310046
SECTION: BUSINESS                    PAGE: A-4   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

WHAT'S WRONG WITH THIS PICTURE?

Americans' personal income stagnated in June, raising the question of whether they'll be able to spend enough to keep the economy improving.

So far, they're managing - personal spending was up 0.6 percent for the month and new-home sales jumped 11 percent.

But "The bottom line is, this can't last," said economist Donald H. Straszheim of Merrill Lynch.

Personal income was unchanged at a seasonally adjusted annual rate of $5.3 trillion, breaking a string of six consecutive increases, the Commerce Department said Friday.

The combination last month of relatively brisk consumer spending and no income growth depressed Americans' savings rate - savings as a percentage of after-tax income - to 3.9 percent. That was the lowest since October 1990 and down from 4.6 percent the month before.

"We've seen several months now with not much income growth and still halfway decent increases in spending," Straszheim said. "The net result is people are spending increasingly out of savings. That's not a sustainable process. What's necessary is for employment to pick up."

The most-watched component of income - wages and salaries - slipped 0.1 percent following a 1 percent gain in May.

Business owners' and rental income also rose, as did government transfer payments such as unemployment benefits. Interest income, however, fell and tax payments rose.

Real disposable income - inflation-adjusted income after taxes - fell 0.1 percent after a 0.3 percent gain in May.

Consumer spending, meanwhile, rose 0.6 percent for long-lasting durable goods such as cars and appliances. It increased 0.3 percent for non-durable goods and 0.8 percent for services.

by CNB