A month it was the US which saw its savings rate plummet to the lowest since the start of the Second Great Depression…
And now it is the Euro Area’s turn to see its savings crumble to 12.2% in Q4 2012, from 12.8% previously, the lowest in, well, ever, since the adoption of the Euro:
Why? Gross disposable income just imploded, dropping at the lowest “growth” rate ever. Notably, wages were a far bigger detractor to income than taxes.
U.S. Spending On Services Jumps By Most Ever As Incomes Disappoint, Savings Rate Near Five Year Lows
Real disposable income: oops.
Finally, since both spending and income rose at the same pace, the personal savings rate was flat from February, or at 2.7%: just barely higher than the 5 year low of 2.2% posted in January. In other words consumers continue to be tapped out, and it is unclear where the income spurt will come from to drive the much needed spending surge in the coming months. Oh yes, Bernanke’s trickle down magic of course. How could we forget.
Smallest gain in three months another sign economy has softened
Consumers were more cautious spenders in March, and income growth also softened, reinforcing a bevy of reports that indicate the U.S. economy slowed as the spring began.
Consumer spending rose a seasonally adjusted 0.2% last month, down from 0.7% in February, the Commerce Department said Monday. It was the smallest gain in three months.
The increase in spending, however, was slightly higher than 0.1% forecast of economists polled by MarketWatch, so the report helped pushed stock prices higher in Monday action.
Consumer spending is the main engine of economic growth. When Americans buy more goods and services, businesses generate higher sales and profits and can afford to hire workers. Less spending results in slower economic growth.
- advertisements -