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Spending soars, savings slip
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February 1, 1999: 9:06 a.m. ET
December personal spending blows away estimates, savings rate falls to 1933 level
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NEW YORK (CNNfn) - U.S. consumers opened up their wallets with abandon in December, as spending outpaced both income gains and economic forecasts and the savings rate plunged to its lowest level since the Depression.
The Commerce Department reports that personal spending -- estimated to account for as much as two-thirds of the nation's economic activity -- rose 0.8 percent in December to $5.96 trillion, up from a 0.2 percent rise the month before.
Economists had forecast a 0.5 percent gain in spending for the last month in 1998.
At the same time, personal income grew a healthy 0.5 percent to $7.284 trillion, up from a 0.4 percent gain in November. Still, those who track the nation's economic health predicted income would rise 0.6 percent.
Robust consumerism, especially in the housing and auto sectors, however, came at the expense of the personal savings rate. The rate dipped 0.1 percent in December for a second straight month.
For all of 1998, the savings rate was 0.5 percent, the lowest level since 1933.
Nancy Kimelman, chief economist for Thompson Global Markets, likened the U.S. economy to the go-go Energizer battery.
"We have a consumer who just won't quit," she said in an interview with CNNfn. "(The consumer) keeps going and going."
Kimelman noted, however, that a 0.8 percent spending rate is "not sustainable," and said consumers will have to cool it later this year.
She added Federal Reserve chairman Alan Greenspan may be forced to tighten interest rates later this year if consumption levels don't slow down. 
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