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INCOME, SPENDING INCREASES DAMPEN FEARS OF RECESSION
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INCOME, SPENDING INCREASES DAMPEN FEARS OF RECESSION

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Consumer spending posted its largest increase in three years in 1989, with analysts predicting continued purchasing strength in the first quarter this year.

The Commerce Department said spending totaled $3.47 trillion, a 7.3 percent gain over 1988 and the sharpest advance since a 6.1 percent increase in 1986.At the same time, it said personal incomes rose 9 percent to $4.43 trillion last year, up from 7.6 percent in 1988 and the fastest advance since rising 9.5 percent in 1984.

``You look at those numbers and you kind of wonder why everybody was talking about recession,' remarked Michael K. Evans, head of a Washington forecasting organization. ``Those were pretty good numbers, especially the growth in income, which was quite robust.'

The difference between 1989 earnings and purchases helped boost Americans' savings rate - savings as a percent of disposable income - to 5.5 percent from 4.2 percent in 1988. It was the highest rate since 1984's 6.1 percent.

Despite the increases in 1989 incomes and consumption, the year ended on a sluggish note. Economic growth has been held back by high interest rates resulting from Federal Reserve efforts to slow inflation by keeping a tight grip on credit.

The Commerce Department reported last Friday that the gross national product grew only 0.5 percent in the October-December quarter, down from a 3 percent advance in the third quarter.

The year-end economic sluggishness was further reflected in Monday's report of a 0.5 percent increase in personal income in December, down from the 0.9 percent gains in both October and November.

Much of the December increase, Commerce said, was spent on fuel oil, electricity and natural gas because of unusually cold weather.

Nevertheless, Sandra Shaber, an economist with the Futures Group here, said consumers still were spending as the year ended, although cautiously.

``We'll see an improvement in consumer spending in the first quarter' of 1990, she said. ``We already see an increase in car sales which made the whole (fourth) quarter look so bad.'

Purchases of durable goods - big-ticket items expected to last more than three years - rose $6.7 billion in December after declining $2.8 billion the previous month. Non-durable purchases gained $6.2 billion after a $3.4 billion November increase. Spending on services increased $24.1 billion following a $9.6 billion advance the previous month.

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