Consumer Spending Rises; Savings Drop to 10-Year Low

Consumer spending accounts for more than two-thirds of economic activity

Image Credits: Chris Potter, Flickr.

U.S. consumer spending rose solidly in December as demand for goods and services increased, but the gain came at the expense of savings, which dropped to a 10-year low in a troubling sign for future consumption and economic growth.

Rising household wealth due to record gains on the U.S. stock market as well as higher home prices likely made Americans more confident to dip into their savings to fund purchases, economists said.

Savings are now at levels last seen in December 2007, when the economy slipped into recession.

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