Negative Personal Savings Rate

The San Francisco Chronicle had an interesting article on the personal savings rate, which could be negative for 2005.

Traditionally this unspent income has been used to accumulate capital for future investment. By contrast, the recent spell of low savings -- or high spending -- has provided a short-term stimulus, helping the nation's output of goods and services grow at an enviable 4.3 percent rate in the third quarter of 2005. But many experts say that in the months ahead, savings-starved, debt-burdened households will slow their spending and, with it, the economy. "You're seeing a situation where the consumers are spending every penny they possibly can and borrowing on top of that,'' said Joel Naroff, a Pennsylvania economic consultant, who expects growth to cool in the near future.

The Chicago Tribune confirmed in an article that, for the first time in thirteen years, borrowing declined for two consecutive months, October and November.

Tags: Economics

Updated at: 11 January 2006 12:01 AM

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