Retailers Report Weak Sales Despite Rising Personal Income Reports Reflect Continued Sluggishness In Economic Growth

Americans’ incomes rose faster in July than in six months, the government said Thursday, but weak retail sales and sharply lower factory orders suggested the economy hasn’t shaken its sluggishness.

A flurry of data released on the eve of a key employment report showed spending is leveling off and renewed speculation that the Federal Reserve is poised for another interest-rate cut.

“We’re seeing the need for businesses to adjust from last year’s boom level to more moderate growth,” said economist Cynthia Latta of DRI-McGraw Hill, a forecasting service in Lexington, Mass.

With today’s jobs report looming, Thursday’s numbers had minimal impact on Wall Street. The Dow Jones industrial average rose 5.99 points to close at 4,610.56. Bond prices advanced, pushing the yield on the 30-year Treasury bond in the opposite direction, down to 6.65 percent.

Summertime hiring at restaurants and other retail outlets pushed personal income up 0.7 percent in July - the biggest increase since a 0.8 percent gain in January.

But the Commerce Department also said spending advanced just 0.2 percent last month, the slowest pace since it was unchanged in April. The department separately announced that severe cuts in automobile production made up much of a 1.3 percent drop in manufacturing orders.

Meanwhile, the nation’s largest retailers reported disappointing August sales, as hot weather weakened demand for fall clothing and home furnishings did not fare much better.

In another report, the Labor Department said the number of Americans filing first-time claims for unemployment benefits was unchanged last week at 349,000. The less volatile four-week average rose to 342,000 from 335,000 a week earlier.

The new evidence of slow economic growth came just one day after the government reported the economy this spring turned in its weakest performance in nearly four years, expanding at a 1.1 percent annual rate.

The Commerce Department said disposable income - income after taxes - rose 0.6 percent in July on top of a 0.4 percent gain the previous month.

The combination of incomes and spending meant that Americans’ savings rate - savings as a percentage of disposable income - rose to 4.2 percent in July from 3.8 percent a month earlier. The last time the savings rate was that high was in April.

1. Personal income 2. Personal spending