Newspaper article THE JOURNAL RECORD

Decline in Personal Incomes Underscores Fragile Economy

Newspaper article THE JOURNAL RECORD

Decline in Personal Incomes Underscores Fragile Economy

Article excerpt

WASHINGTON (AP) _ Americans' incomes fell in July for the first time in six months and new home sales slumped 8.5 percent, the government said Thursday in reports underscoring the economy's fragility.

Personal incomes edged down 0.1 percent, to a seasonally adjusted annual rate of $4.81 trillion. That broke a string of five monthly advances, the Commerce Department said.

The drop, even though it was small and accompanied by a 0.4 percent increase in consumer spending, raised concern about whether the economy would successfully pull itself out of the first recession in eight years.

"It's like a bicycle. If you don't have enough forward momentum, you fall off," said economist Robert G. Dederick of Northern Trust Co. in Chicago.

Consumer spending, representing two-thirds of the gross national product, is considered the key to any sustained economic revival.

"Consumers are not going to give the recovery the jump start it needs anytime soon," said economist John M. Albertine, a Washington-based consultant. "In past recoveries, consumers have led the way, but today, it appears that they have grown conservative."

Separately, the departments of Commerce and of Housing and Urban Development said new home sales slumped 8.5 percent in July. An earlier estimate showing a 7.4 percent gain in June was revised sharply downward to 4 percent.

The July decline, along with a 6.7 percent decrease in sales of existing homes reported earlier this week by the National Association of Realtors, suggested the housing rebound may be fizzling.

"This is distressing for the economy as a whole," said economist Thomas Holloway of the Mortgage Bankers Association of America. "We're in the middle of a very fragile recovery and this economy needs all the help it can get from housing."

Housing is usually one of the first sectors to respond to lower interest rates resulting from a recession, and often leads the economy out of downturns.

The July increase in consumer spending to a seasonally adjusted annual rate of $3.84 trillion followed strong gains of 0.7 percent in June and 0.8 percent in May.

But, because income was so sluggish, consumers in effect maintained their living standards by dipping into their savings. …

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