U.S. households increase savings, spending

06.26.09
By Sarah Beldo

Americans are continuing to temper their spending, set aside their credit cards and save for the future, new figures from the government suggest.

Commerce Department data shows that the national savings rate jumped to 6.9 percent in May from 5.6 percent the month before - the highest level seen in more than 15 years.

Meanwhile, overall personal income increased by 1.4 percent last month, up from the 0.7 percent growth seen in April.

Analysts said that the rise in income was likely due to the government stimulus program that was passed in February. However, they pointed out that the lower tax withholdings were intended to boost spending, while many people seem to have devoted the extra cash to savings instead.

Spending by individuals did increase last month, by a modest 0.3 percent that was in line with expectations, according to the Associated Press.

"Personal tax cuts and government income support have brought consumers back from the dead, but the recuperation period promises to be a long one," BMO Capital Markets economist Sal Guatieri told the AP.

Economists do not expect spending to rise significantly until the job market settles down and the unemployment rate stops rising.

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U.S. consumers are putting more money into savings