Personal Spending Outpaces Income, UT Economist Says

Knoxville — The personal incomes of Americans rose 0.3 percent in December, but spending rose 0.8 percent.

The report by the Commerce Department said average incomes rose less than expected.

“Clearly, consumers cannot spend more than they earn in the long run,” said University of Tennessee economist Matt Murray. “But they certainly can spend more than they earn in the short run, taking money out of the bank or putting purchases on credit cards.”

The Commerce Department report said the annual saving rate in 1999 hit an all-time low of 2.4 percent.

“When consumers begin to retrench in their spending, I think we may see a significant slow-down begin to take place for the national economy,” Murray said.

Analysts have said that was the concern that led the Federal Reserve to increase interest rates last week.