Updated from 9:14 a.m. EDT
said Monday that personal income grew at the fastest pace in September in nearly a year, due primarily to increases in federal farm subsidies. The strong income growth helped offset continued increases in consumer spending, improving the personal savings rate from August's record low.
Personal income grew by $90.3 billion, or 1.1%, in September. That's nearly triple the revised 0.4% pace of the previous month, and sharply higher than the 0.6% consensus forecast among analysts surveyed by
. September's increase is also the largest since October 1999, when personal income rose $100.4 billion, or 1.3%.
In October 1999, personal income was buoyed by federal agriculture subsidy payments and union contract signing bonuses in many manufacturing industries.
Federal agricultural subsidy payments to farm proprietors and to owners of leased farm land also made up much of the September 2000 increase, boosting personal income $61.0 billion in September, compared with $0.4 billion in August.
Excluding the farm subsidies, personal income increased $29.7 billion, or 0.4%, in September -- which better reflects the economy's moderate growth pace in the third quarter, said David Kelly, a senior vice president and economic advisor at
Private wage and salary disbursements increased $25.8 billion in September, nearly triple the $9.5 billion increase in August. Most of the increase in salary disbursements came in the service and distributive industries, where payrolls grew $9.5 billion and $16.3 billion respectively. Manufacturing payrolls decreased $2.4 billion, but that was less than the previous month's $4.3 billion decline.
Disposable personal income, adjusted to remove price changes, grew 0.7% in September, up from a 0.2% increase the previous month.
The pace of spending also grew in September, increasing 0.8%, with much of it concentrated in the durable goods sector. Spending on durable goods rose by 1.5%, with purchases of cars and automotive parts accounting for about two-thirds of the increase. Spending in the non-durable goods and the services categories jumped by 0.9% and 0.7%, respectively.
Personal savings was a negative $7.8 billion in September, up from a negative $28.4 billion in August. The personal savings rate, improved to a negative 0.1%, up from 0.4% in
August, the lowest monthly level recorded since the government began tracking such statistics in 1959.
But Kelly and other analysts downplay the savings rate, the percentage of income left over after spending, because it doesn't account for such factors as capital gains income or wealth tied to home ownership. "Part of the problem with underestimating income growth is it gives the impression that people aren't saving," said Kelly.
Kelly said Monday's data was good news for the economy, though he stressed the importance of looking at long-term trends, not just month-to-month data.
"That (long-term trend) shows a strong, growing economy driven by investment spending and consumer spending, which can achieve strong growth without higher inflation," said Kelly.