- The Washington Times - Saturday, March 30, 2002

ASSOCIATED PRESS

Americans' incomes increased solidly in February and they spent more, too fresh signs that the economy is gaining strength after a comparatively brief recession.

The Commerce Department reported yesterday that spending by consumers, which accounts for two-thirds of all economic activity in the United States, increased 0.6 percent last month after jumping 0.5 percent in January.

At the same time, Americans' incomes, which include wages, interest and government benefits, also increased by 0.6 percent, the largest expansion since October 2000. Incomes rose 0.5 percent in January.

The data reinforce economists' view that the recession, which began last March, has ended and probably will turn out to be the country's mildest downturn ever.

"It's a pretty upbeat report," said Bill Cheney, chief economist with John Hancock Financial Services, Inc. "We've got growth in total wage and salary incomes and spending to match. They're not dramatic numbers, but it's pretty healthy."

Traders could not react to the positive news because U.S. financial markets were closed yesterday in observance of Good Friday.

The new report showed that consumers increased spending last month on big-ticket items, including cars, by 1.7 percent after cutting back 0.8 percent in January.

Disposable incomes increased 0.7 percent in February after soaring 1.8 percent in January.

But the boost in spending probably isn't sustainable, said Wachovia Securities economist Mark Vitner. Rising gas prices and mortgage rates, and the fact that extra money from tax cuts is dwindling, could hurt later this spring, he said.

Because disposable incomes increased more quickly than spending in February, the nation's personal savings rate, which is savings as a percentage of after-tax income, was lifted to 2 percent from 1.9 percent in January.


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