Savings Rate Hits Record Low As Spending Increases 0.6%
WASHINGTON -- Incomes rose solidly in August, but spending went up faster, pulling the nation's personal savings rate down to a record low.
Personal income, which includes wages, interest and government benefits, grew by 0.4% last month, while spending rose by a brisk 0.6%, the Commerce Department reported Friday.
All that spending drove down the personal-savings rate -- savings as a percentage of after-tax income -- to minus 0.4% in August, an all-time monthly low since such record-keeping began in 1959. July's savings rate was revised upward to zero from minus 0.2%.
Negative savings, or dissaving as economists call it, means consumers either borrowed or drew down assets, say by selling stocks or dipping into savings accounts, to maintain spending.
The 0.4% increase in income was slightly faster than the 0.3% rise that economists surveyed by Thomson Global Markets had been anticipating, while the 0.6% jump in spending was a little larger than the 0.5% gain expected. In July, Americans' incomes grew by 0.3% but their spending rose twice as fast, by 0.6%.
Income was lifted by a 0.3% increase in wages and salaries. Prior to the report, analysts had said they expected the now-settled Verizon Communications Inc. strike to put a crimp in income for the month, as strikers went without their paychecks temporarily.
Total income growth last month was damped in part by the departure of temporary federal government census workers. Analysts also expected sluggish job growth in August to temper income increases for the month.
Friday's report showed that Americans' spending on durable goods -- cars and other costly manufactured goods expected to last at least three years -- grew by 1.6% in August, the fastest pace since a 1.7% increase in February. In July, spending on durable goods rose 0.7%.
Spending on nondurable goods, such as food and fuel, rose 0.2% in August, down from a 0.7% rise the month before.
Disposable income -- what is left after taxes -- rose in August for the second straight month by 0.3%.