Saturday, May 29, 1999
Spending rises while savings fall
Confidence fuels consumption
BY JEANNINE AVERSA
The Associated Press
WASHINGTON — Money is burning a hole in Americans' pockets. Once again, consumers in April spent almost as much as they earned, helping to push the nation's savings rate to an all-time low.
Spending climbed 0.4 percent last month, a tad lower than the 0.5 percent increase in Americans' personal income, the Commerce Department reported Friday. The income figure includes wages, interest and govern ment benefits.
“You can't underestimate the hedonism of the American consumer,” said economist Mark Zandi of Regional Financial Associates in West Chester, Pa. “But consumers have good reason to be out there spending. They've got jobs, their incomes are rising, confidence is high, and the stock market is booming.”
So far this year, Americans are spending more than they earned.
Spending in March rose 0.5 percent, while income in creased 0.3 percent. In February, spending went up 0.8 percent, and income climbed 0.5 percent. In January, the increase in spending matched income at 0.6 percent.
That trend dragged down the savings rate — savings as a percentage of after-tax income — to a record low of minus 0.7 percent in April. Savings have now been in negative territory for five of the past six months.
Consumers are trying to maintain their spending habits by dipping into their savings once again, analysts said.
The spending spree helped keep the U.S. economy grow ing at a robust 4.1 percent annual rate during the first three months of this year, despite economic turmoil elsewhere around the globe.
Americans are enjoying the lowest unemployment rate in almost three decades, and high demand for labor — even labor shortages in some regions and in industries such as construction — is helping to boost wages. In April, wages rose 0.6 percent, after increasing 0.2 percent in March.
Continuing stock market gains and other profits also are lining many people's pockets. Interest and dividend income also rose last month.
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