WASHINGTON -
According to Commerce, the 2006 figure was lower than a negative 0.4% reported during 2005 and was the lowest rate of savings since a negative 1.5% rate reported in 1933. Commerce said that the savings rate has been negative for an entire year only four times in history: 2006, 2005, 1933 and 1932.
Economists have been quick to point out that the reasons for the negative savings rates in 2006/2005 and 1933/1932 are vastly different. During the Depression, with up to 25% of the workforce not working, people were tapping savings for basic necessities. During the current negative savings years, however, consumers are primarily borrowing to underwrite purchases. Those same economists say consumers may be feeling they are saving, as they've seen increases in home values and in stock portfolios.
The Commerce Dept. determines the savings rate by taking the amount of personal income left after taxes are paid (disposable income) and subtracting the amount of spending.
Commerce noted that for December, the savings rate actually was even lower at a negative 1.2% and has now been in negative territory for 21 consecutive months.
The 0.7% rise in personal spending was the best showing since a similar gain in July. It followed increases of 0.5% in November and 0.3% in October, Commerce reported, and demonstrates the solid spending by consumers during the Christmas shopping season.
Consumer spending posted a solid rebound in the final three months of the year, helping to lift overall economic growth to a rate of 3.5% during that period, up significantly after lackluster growth rates in the spring and fall.
Incomes were up 0.5% in December, the best showing since a similar increase in September.
