Consumers spending climbs again — but at the expense of savings
The numbers: Consumer spending rose a sharp 0.8% in October, suggesting that U.S. households aren’t pulling back despite growing worries of recession.
Spending rose a smaller but still solid 0.5% last month after adjusting for inflation, the government said. The U.S. savings rate rate fell to 2.3% in October, a sign Americans don’t have a big financial cushion to fall back on. It’s the second lowest savings rate on record going back to 1959.The Federal Reserve has jacked up interest rates to try to tame inflation, but higher borrowing costs also slow the economy. Consumers and businesses are already spending less, and if demand falls sharply enough, unemployment would rise and add to the misery.
The increase in incomes is not enough to support all the spending, however, since inflation is running somewhat higher. So Americans are relying on their savings as much as ever.
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