Americans' income rose 0.4 percent in August, the seventh straight increase, but failed to keep pace with a 0.9 percent jump in spending, the government said Friday.
The spending increase was the largest since spending rose by 1.3 percent in February.The Commerce Department also reported that disposable income - income after taxes - rose 0.5 percent in August.
The spending increase was greater than many analysts expected and appears to be in line with other recent reports that suggest there is still considerable strength in the economy.
During July, personal income increased 0.5 percent, while spending rose 0.3 percent, revised upward from a previous estimate of 0.2 percent. Income last fell in January, when it slipped 0.6 per-cent.
Consumer spending, which accounts for two-thirds of the nation's gross domestic product, was up for the fourth straight month and six of the last seven.
The combination of incomes and spending meant that Americans' savings rate - savings as a percentage of disposable income - was 3.8 percent in August, compared to a revised 4.2 percent the previous month. The Commerce Department previously pegged the savings rate at 4.1 percent for July.
Many economists had predicted in advance of today's report that incomes were up 0.4 percent and spending 0.7 percent in August.
The government reported Thursday that the economy expanded at a 4.1 percent annual rate in the second quarter of 1994. Many analysts expect the growth rate to have slowed in the third quarter, which ends Friday.
Wages and salaries, the most closely watched component of income, increased $7.9 billion in August.
Government wages and salaries rose $0.1 billion in August.