Washington, DC, March 1, 2006--Personal spending rose 0.9 percent in January as personal incomes rose by 0.7 percent, according to the Commerce Department.
The gain in spending was the strongest in six months, the increase income was the best showing since September, with the gains attributed to a variety of factors including cost-of-living adjustments for Social Security benefits and the new drug benefit for Medicare recipients.
The bigger rise in spending compared to incomes kept the personal savings rate in negative territory at 0.7 percent in January. That mean Americans spent more than their after-tax incomes, meaning they had to dip into prior savings or increase their borrowing.
For all of 2005, the savings rate registered a negative 0.4 percent, the first time the savings rate has been in negative territory for an entire year since the Depression years of 1932 and 1933.
Real spending on durable goods increased 1.3%. Real spending on nondurable goods also rose 1.3%. Real spending on services fell 0.3%, largely reflecting lower heating bills.
