US personal income, spending disappoint

'Cash for clunkers' is the only bright spot in the Commerce Department report.

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    Mariano Serrano, holding 'cash for clunkers' paperwork, looked over a new car at a California dealership earlier this month. Except for a boost in auto sales, Americans' personal spending was flat, the Commerce Department reported Friday.
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Americans' incomes were essentially flat last month and, except for the "cash for clunker" program, so was their spending, the Commerce Department reported Friday.

After falling 1.1 percent from May to June, personal income in July rose less than 0.1 percent, slightly less than economists had expected.

Personal spending rose 0.2 percent, marking the third monthly rise. But the uptick was all due to a subsidy-fueled jump in auto sales at the end of July. The federal "cash for clunkers" program guaranteed a high trade-in value for old gas guzzlers if people bought a new fuel-efficient car.

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Taxes rose in July, which caused disposable income (personal income minus taxes) to fall slightly. Accounting for inflation, it fell 0.1 percent.

"The fiscal stimulus that boosted disposable incomes in the spring is now fading," wrote Paul Dales, an economist with Capital Economics, in an analysis. "Excluding the fiscal stimulus, incomes have been trending lower for the last seven months."

The new data is hardly encouraging for those expecting a recovery. If Americans don't earn more, they're not likely to spend more. If they don't spend more, then the US economy will be attempting liftoff without its main rocket booster.

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