U.S. Consumers Count No Rainy Days

  • Share
  • Read Later
WASHINGTON: America went into hock yet again in February, with consumers' spending rising faster than their incomes for the fifth time in six months. Over that period, the nation's personal savings rate -- savings as a percentage of take-home pay -- is at its lowest since the 1930s. But lest observers take America for a nation of fiddling grasshoppers, TIME senior economics reporter Bernard Baumohl says the the statistic, especially in this booming economy, doesn't tell the whole story.

"This doesn't take into account capital gains from investments, nor does it figure in paycheck deductions that go into mutual funds or 401(k)s," he says. "If capital gains alone were included, the rate would be somewhere between 4 and 8 percent." With the modern stock market looking as safe as any bank (and a heck of a lot more lucrative) and interest rates low, putting your money in an old-fashioned savings account is a waste. "Americans are spending because they're confident about the future and about their portfolios," says Baumohl. "If the markets take a serious downturn, that'll change fast." But for the average American, the rainy day clouds are far off on the horizon.