31 Aug 2010

US consumer spending on the rise

10:23 am on 31 August 2010

Consumer spending in the United States rose by 0.4% in July, as shoppers saved less of what they earned.

However, personal income grew only 0.2%. Economists had expected both numbers to rise by 0.3%.

Meanwhile, a regional manufacturing survey for Texas showed zero growth in August, confirming a nationwide slowdown in industrial output.

The growth in consumer spending was the fastest since March, though total spending still remains well below its pre-recession highs.

However, the BBC reports the fact that personal income grew more slowly means that the savings rate in the United States - the percentage of income that households choose not to spend - fell slightly, to 5.9% from 6.2% in June.

Before the global recession, the US savings rate was close to zero, meaning that households spent nearly all they earned.

It rose during the recession, however, resulting in a big fall in consumer spending.

Many economists expect the savings rate to remain at 6% or rise even further. Historically, the savings rate has been 8% - 12%.