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U.S. saving at Depression-era nadir
The Associated Press, Reuters

MONDAY, JANUARY 30, 2006


WASHINGTON The personal savings rate of American fell into negative territory in 2005, something that has not happened since the Great Depression. Consumers depleted savings to finance the purchases of cars and other large items, the Commerce Department reported Monday.

The savings rate was minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but had to dip into previous savings or increase borrowing, the report said.

The savings rate has been negative for an entire year only twice before - in 1932 and 1933 - both years of the Depression, a time of wide business failures and job layoffs.

Analysts said different factors were at play now, with employment growth strong. Americans feel they can spend more, given that the value of their homes, the biggest asset for most families, has been rising sharply in recent years.

Still, analysts cautioned that this behavior is risky at a time when 78 million Americans are near retirement.

"Americans seem to have the feeling that it is wimpish to save," said David Wyss, chief economist at Standard & Poor's in New York. "The idea is to put away money for old age, and we are just not doing that."

The Commerce report said that consumer spending for December rose by 0.9 percent, more than double the 0.4 percent increase in incomes last month.

A price gauge that excludes food and energy rose by a tiny 0.1 percent in December, down from a 0.2 percent rise in November. This inflation index linked to consumer spending is closely watched by officials at the Federal Reserve.

The central bank will meet on Tuesday, when it is expected to raise interest rates again. Many economists maintain, however, that the current series of rate rises is drawing to a close as the Fed is starting to see the impact of the previous rate rises in a slowing economy.

The 0.5 percent negative savings rate for the year followed a 1.8 percent rate of savings in 2004. The negative rate for 1932 was 0.9 percent and for 1933 a record 1.5 percent.

Some economists are sanguine about the lack of savings.

"Consumer spending growth will moderate, but it won't impede the current pace of economic expansion," said Mark Zandi, chief economist at Moody's Economy.com.

WASHINGTON The personal savings rate of American fell into negative territory in 2005, something that has not happened since the Great Depression. Consumers depleted savings to finance the purchases of cars and other large items, the Commerce Department reported Monday.

The savings rate was minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but had to dip into previous savings or increase borrowing, the report said.

The savings rate has been negative for an entire year only twice before - in 1932 and 1933 - both years of the Depression, a time of wide business failures and job layoffs.

Analysts said different factors were at play now, with employment growth strong. Americans feel they can spend more, given that the value of their homes, the biggest asset for most families, has been rising sharply in recent years.

Still, analysts cautioned that this behavior is risky at a time when 78 million Americans are near retirement.

"Americans seem to have the feeling that it is wimpish to save," said David Wyss, chief economist at Standard & Poor's in New York. "The idea is to put away money for old age, and we are just not doing that."

The Commerce report said that consumer spending for December rose by 0.9 percent, more than double the 0.4 percent increase in incomes last month.

A price gauge that excludes food and energy rose by a tiny 0.1 percent in December, down from a 0.2 percent rise in November. This inflation index linked to consumer spending is closely watched by officials at the Federal Reserve.

The central bank will meet on Tuesday, when it is expected to raise interest rates again. Many economists maintain, however, that the current series of rate rises is drawing to a close as the Fed is starting to see the impact of the previous rate rises in a slowing economy.

The 0.5 percent negative savings rate for the year followed a 1.8 percent rate of savings in 2004. The negative rate for 1932 was 0.9 percent and for 1933 a record 1.5 percent.

Some economists are sanguine about the lack of savings.

"Consumer spending growth will moderate, but it won't impede the current pace of economic expansion," said Mark Zandi, chief economist at Moody's Economy.com.

WASHINGTON The personal savings rate of American fell into negative territory in 2005, something that has not happened since the Great Depression. Consumers depleted savings to finance the purchases of cars and other large items, the Commerce Department reported Monday.

The savings rate was minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but had to dip into previous savings or increase borrowing, the report said.

The savings rate has been negative for an entire year only twice before - in 1932 and 1933 - both years of the Depression, a time of wide business failures and job layoffs.

Analysts said different factors were at play now, with employment growth strong. Americans feel they can spend more, given that the value of their homes, the biggest asset for most families, has been rising sharply in recent years.

Still, analysts cautioned that this behavior is risky at a time when 78 million Americans are near retirement.

"Americans seem to have the feeling that it is wimpish to save," said David Wyss, chief economist at Standard & Poor's in New York. "The idea is to put away money for old age, and we are just not doing that."

The Commerce report said that consumer spending for December rose by 0.9 percent, more than double the 0.4 percent increase in incomes last month.

A price gauge that excludes food and energy rose by a tiny 0.1 percent in December, down from a 0.2 percent rise in November. This inflation index linked to consumer spending is closely watched by officials at the Federal Reserve.

The central bank will meet on Tuesday, when it is expected to raise interest rates again. Many economists maintain, however, that the current series of rate rises is drawing to a close as the Fed is starting to see the impact of the previous rate rises in a slowing economy.

The 0.5 percent negative savings rate for the year followed a 1.8 percent rate of savings in 2004. The negative rate for 1932 was 0.9 percent and for 1933 a record 1.5 percent.

Some economists are sanguine about the lack of savings.

"Consumer spending growth will moderate, but it won't impede the current pace of economic expansion," said Mark Zandi, chief economist at Moody's Economy.com.

WASHINGTON The personal savings rate of American fell into negative territory in 2005, something that has not happened since the Great Depression. Consumers depleted savings to finance the purchases of cars and other large items, the Commerce Department reported Monday.

The savings rate was minus 0.5 percent, meaning that Americans not only spent all of their after-tax income last year but had to dip into previous savings or increase borrowing, the report said.

The savings rate has been negative for an entire year only twice before - in 1932 and 1933 - both years of the Depression, a time of wide business failures and job layoffs.

Analysts said different factors were at play now, with employment growth strong. Americans feel they can spend more, given that the value of their homes, the biggest asset for most families, has been rising sharply in recent years.

Still, analysts cautioned that this behavior is risky at a time when 78 million Americans are near retirement.

"Americans seem to have the feeling that it is wimpish to save," said David Wyss, chief economist at Standard & Poor's in New York. "The idea is to put away money for old age, and we are just not doing that."

The Commerce report said that consumer spending for December rose by 0.9 percent, more than double the 0.4 percent increase in incomes last month.

A price gauge that excludes food and energy rose by a tiny 0.1 percent in December, down from a 0.2 percent rise in November. This inflation index linked to consumer spending is closely watched by officials at the Federal Reserve.

The central bank will meet on Tuesday, when it is expected to raise interest rates again. Many economists maintain, however, that the current series of rate rises is drawing to a close as the Fed is starting to see the impact of the previous rate rises in a slowing economy.

The 0.5 percent negative savings rate for the year followed a 1.8 percent rate of savings in 2004. The negative rate for 1932 was 0.9 percent and for 1933 a record 1.5 percent.

Some economists are sanguine about the lack of savings.

"Consumer spending growth will moderate, but it won't impede the current pace of economic expansion," said Mark Zandi, chief economist at Moody's Economy.com.






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