June 2010

Savings rate grows faster than consumer spending

From The Washington Post.

Americans socked away more savings in May than at any time since September, as they continued to be cautious spenders, according to government data released Monday.

According to the Commerce Department, the personal savings rate in May -- the part of every paycheck that goes unspent -- rose to 4 percent, the highest amount in nearly a year, as worried consumers saw stocks tumble in the United States and debt problems spread across Europe.

Though virtuous, an increase in personal savings creates a paradox for the gross domestic product, 70 percent of which is based on consumer spending. The personal savings rate dropped to barely more than 1 percent in 2005 when the housing boom was at its height, as consumers borrowed from their homes to buy goods.

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