Nine months of zero to negative savings certainly makes a trend.
U.S. personal spending increased more than expected in December as incomes grew, a government report showed, suggesting a pickup in demand at the end of 2005 that may help boost first-quarter growth.
The 0.9 percent increase in purchases, the most in five months, followed a 0.5 percent November gain that was larger than previously reported, the Commerce Department said today in Washington. The report’s price gauge tied to spending patterns and excluding food and energy, the Federal Reserve’s preferred measure for tracking inflation, rose 0.1 percent in December and was up 1.9 percent for all of 2005.
The savings rate has been negative in eight of the last nine months, indicating consumers are dipping into savings to maintain spending. Consumers spent $42 billion more than they earned last year, the biggest dip in savings since record-keeping began in 1929.
To finance the increased spending, Americans dipped further into their savings, pushing the savings rate for all of 2005 into negative territory at minus 0.5 percent. That was the lowest annual savings rate since a decline of 1.5 percent in 1933, a year in which the country was struggling to cope with the Great Depression.
Personal Savings Rate
Oct -0.1 (revised)
Nov -0.2 (revised)
Dec -0.7 (preliminary)