By MARTIN CRUTSINGER
WASHINGTON — Americans’ personal income, buffeted by a big swing in federal farm payments, fell by 0.2 percent in October, the first decline in nearly two years. Consumer spending rose by the smallest amount in six months.
The Commerce Department reported today that consumer spending was up just 0.2 percent last month, the weakest performance since a 0.2 percent rise in April. Spending had shot up a strong 0.9 percent in September.
The 0.2 percent drop in incomes, the first decline since December 1998, resulted from a big swing in federal subsidy payments to farmers, which had soared in September only to return to more normal levels in October. Personal incomes had been up a sizable 1.1 percent in September.
Without the big changes in farm payments, however, personal incomes would have risen just 0.4 percent in September and instead of declining in October would have posted a 0.5 percent increase.
Disposable personal income, the amount left after paying taxes, fell by 0.4 percent in October, the biggest decline in four years. The combination of falling incomes and a slight growth in spending pushed the personal savings rate down to a record low of negative 0.8 percent in October.
Given the special factors, analysts were not alarmed by the income decline and the weak growth in consumer spending. Income growth is expected to remain strong in coming months given that the nation’s unemployment rate is currently at a 30-year low of 3.9 percent. Most economists are forecasting a good Christmas sales season for retailers.
Meanwhile, the Labor Department reported Thursday that the number of Americans filing new claims for unemployment benefits rose last week to 358,000, the highest level in more than two years.
The increase in new claims from the previous week was an unexpectedly large 19,000. But Labor Department analysts cautioned that the Thanksgiving holiday may have played a role in the big swing in claims. Jobless filings are particularly volatile during holiday weeks.
The government reported Wednesday that the economy slowed even more than previously believed in the July-September quarter, with the gross domestic product rising at an annual rate of just 2.4 percent, less than half the torrid 5.6 percent growth rate during the April-June quarter.
While the economy is slowing under the impact of a string of interest rate increases by the Federal Reserve, economists believe there is little threat that the current record-long expansion will dip into a recession.
Rather, most economists believe the Fed will achieve its hoped-for "soft landing," in which economic growth slows enough to keep inflation under control but does not stall out. Many analysts believe this year’s predicted economic growth of more than 5 percent will be followed by more moderate growth of around 3 percent next year.
For October, farm income edged up $3.1 billion at an annual rate after a huge September jump of $50.1 billion. Private wages and salaries, the more closely watched figure, increased by $30.6 billion at an annual rate in October compared to a September gain of $26.1 billion.
On the spending side, personal consumption spending rose at an annual rate of $13.1 billion in October following a September increase of $61.7 billion.
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