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News > Economy
Personal income up 0.4%
June 28, 1999: 9:10 a.m. ET

But May consumption grows faster, pushing savings rate to all-time low
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NEW YORK (CNNfn) - Americans' incomes rose in May, but their rate of spending climbed at a higher rate, the government said Monday, pushing the nation's personal savings rate to an all-time low.
     Personal income rose 0.4 percent in May, from 0.5 percent a month earlier, the Commerce Department said Monday.
     Spending climbed 0.6 percent from 0.4 percent the month before.
     This imbalance between earnings and consumption helped push the nation's savings rate to minus 1.2 percent, the lowest level since the department began keeping statistics in 1959.
     Monday's report came in close to analysts' expectations. Economists surveyed by Reuters had expected personal income to rise 0.5 percent and spending to increase 0.6 percent.
     The May figures continue a six-month trend of negative savings and comes after another record low rate in April.
     This pattern has caused economists to worry about tough consequences if America's economy turns sour. The spending rate, meanwhile, is also part of a pattern which has been credited for the booming economy.
     "It's looking like this party we're all talking about has turned into a gala," said Richard Yamarone, senior economist at Argus Research told CNNfn.
     The high spending rate is one of the reasons that Yamarone and others say the Federal Reserve this week will raise interest rates to preempt inflation
     While the bond market showed scant reaction to the report, Yamarone said the figures will be closely scrutinized, particularly for their contribution to second-quarter gross domestic product. "This will help shape policy in months to come," he said
     The 30-year Treasury bond rose slightly on the news, climbing up 6/32 to yield 6.13 percent. The bond was up 3/32 just before the report. Back to top

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