U.S. savings rate falls below zero (lowest in 46 years)

[UpInArms]

http://www.marketwatch.com/news/story.asp?guid={D09C8048-99F1-40E4-9805-16EDAB3834B0}&siteid=mktw

WASHINGTON (MarketWatch) - U.S. consumers spent more than they earned in July for just the second time in the last 46 years, the Commerce Department said Thursday.

Personal incomes increased 0.3% in July, while spending soared ahead by 1%. As a result, the personal savings rate tumbled to negative 0.6%, the lowest since monthly records began in 1959. Read the full report.

Quarterly data show negative savings rates for several quarters during the Great Depression. The savings rate was negative 0.2% in October 2001 and was 0% in June.

Negative savings rates are possible if consumers spend by selling assets, dipping into savings or borrowing against future income.

<snip>

Inflation rates heated up in July with higher energy prices. The headline personal consumption expenditure price index rose 0.3%, eating up all income gains in the month. Disposable incomes were flat for the month.

...more...

[leftylady]

1. I do home loans

This does not surprise me at all. You would not believe the amount of debt that most people carry. And they have nothing in savings. Some have 401ks but then they borrow against those.

[Don Claybrook]

2. I don't guess this is like golf

Is a lower score better?

Seriously, this is just one more indicator of how deeply, deeply screwed we really are.

[Roland99]

4. They're just following DICK's motto:

"Reagan proved that deficits don't matter."

[leesa]

3. What is wrong with Americans thinking processes? Why do they think

these bills will not come due? I hear so much phony blather in America about how important the FAMILY is...everywhere people go on and on about how much they love their family and yet they behave like this....I don't get it. Their valuable family will be sleeping on the sidewalk.

[WildClarySage]

7. A lot of Americans are taking their cues from the federal government.

[sybylla]

11. This crappy economy has eaten through any savings I've had

I own a small business and in 2000 had a nice chunk in savings. Nothing major, just enough to live on 6 months if I was forced to. Well the crappy economy the chimp ushered in has been slowly sapping my income to the point I have nothing left in savings and am now looking for a regular job. And the lack of consulting customers is making it so I have less and less to pay the bills.

If it has happened to me, I don't doubt it's happened to others. Lucky for me, I haven't been so blindly optimistic about this economy that I thought I could get away with borrowing until things got better. But all those sheeple who haven't been expecting this have dug themselves in deep.

The coming depression will quickly bring an end to a middle class burdened by debt.

[JNelson6563]

5. Stupid, stupid, stupid

People nowadays think equity in their homes is all the savings they need. I too marvel at how much debt people carry. If they would snap out of the trance where they believe they always need new stuff there could be a chance for our economy but I don't see that happening.

We are fashioning our own noose.

Julie

[JPZenger]

6. Lifestyles Funded With Home Equity Loans

To have a comfortable retirement, it is important to have your house paid off before you retire. However, an incredible amount of money (I believe $140 billion a year) is being taken out in home equity loans. People are converting their home equity into play money. They are eliminating the savings they have in their home's value and using it to fund SUVs, expensive vacations, in-ground pools, etc.

The U.S. taxpayer is also helping to fund this extravagence because the interest on home equity loans is deductible from Federal income tax. I believe the deduction should only be allowed for the purchase of the home and equity loans that are only used for home improvements.

[Coventina]

13. I got a mailing from my bank the other day, screaming:

YOUR HOME IS STUFFED WITH CASH!!!!


:eyes:

[krkaufman]

12. Yeah, it seems like people think their homes are their retirement savings.

But that only works if you can cash-out of your bigger house into something smaller, taking the difference between your sale and purchase/rent cost as your savings. But what happens if/when a large number of people (a boom, say) are all trying to do the same thing? Won't sale prices plummet?

[shapiro]

8. Cars, cars, cars purchased with big discounts.

I don't know but it seems logical to me that the reason it took a plunge in July is because of all the huge car discounts being offered by manufacturers to clear the 2005 cars off the lot. It must have worked because I stopped by my Chevrolet dealer Saturday and his lot was almost bare of 2005 models but in May he was leasing extra parking space for all the cars.

[uppityperson]

17. People are saving less because they bought cars?

because of huge car discounts? This is why we are saving less? Wow. I have little in savings and I want my car4.

[1932]

20. ...a depreciating asset.

[uppityperson]

21. Disruptor is gone, peace

[Liberal Veteran]

9. Hmm. Perhaps our government should set an example.

Bush has been spending like a drunken sailor for years now.

[mainegreen]

10. Daft

Dammit, people need to learn that if you have to take freakin pb&js and fluffernutters to lunch every day and drive your mom's used Omni hand-me-down car to save money, YOU DO IT! It makes me sick. I make less than most people I know. They all drive around in beamers and jeeps, but somehow I've saved something like %3,000 percent more money than they have.

Idiots.

[Toots]

14. I don't believe this is about interest rates

It is about the amount of money people save and they just are not saving any money any more.

[BiggJawn]

15. Well....

When inflation averages 3-4% every year, and you get the same shitty 2% or less increase, and you didn't start out with a Rock-Star salary to begin with, what can you do?

And fluffernutters and driving that Yugo you found in a vacant lot ain't gonna help, either. Not with the price of the fluffernutter going up weekly as the price of food increases....

[ozone_man]

18. Deflation will kick in soon.

There can't be a disconnect between wages and prices for very long. This is an indication that wages aren't keeping up and people are dipping into savings to stay above water. The reflation is done and home equity is spent. No more cushions.

[BiggJawn]

22. Yeah, but Deflation will bring its twin brother Unenployment, too.

"This is an indication that wages aren't keeping up and people are dipping into savings to stay above water."

That's what's going on here. I have a friend who is SO frugal, when you look up "skinflint" in Websters you see her picture there.

As this misadministration has wrought it's damage on the Little People, she has seen her "Cushion" in her bank accounts evaporate. She's not living "Almost paycheck to paycheck" like I am, but she's worried.

[David__77]

16. There's no sign of this trend abating any time soon.

Expect this negative saving rate to increase over the months ahead. I'm not sure there's a grave danger from it now, but if there's a serious recession many will be forced from their over-priced homes.

[1932]

19. Meanwhile the rich get richer:

The 1947-2001 data are from the U.S. Census Bureau, augmented by two additional years. The graph shows the percent of family incomes taken in by each fifth of families, from the lowest fifth to the highest. As you can see, the most significant change is for the wealthiest 20%. All through the 1950s, '60s and '70s they took in slightly more than 40% of the income. Then with the presidency of Ronald Reagan — and almost continuously ever since — they have increased their take. Their gains have come from losses spread almost evenly across the lower four groups.

http://www.thecarpetbaggerreport.com/archives/5097.html

[bribri16]

23. Great "ownership society" and "culture of life."

I am puking.

[Whoa_Nelly]

24. Does this make it official?

Is this the benchmark that officiall shows the start of recession?

[truthisfreedom]

25. this should be prominent news... but watch bushco hide behind Katrina

and pretend eveything is hunky-dory

[SeekerofTruth]

26. This is wrong, it doesn't tell the whole story

The savings rate doesn't factor in what people put into 401k plans, stocks, bonds, etc.

If the survery actually had all the numbers, I would pay attention to it. But, it doesn't, so I don't.

My $.02 worth of opinion.

[Media_Lies_Daily]

27. The cost of gasoline, utilities, food, and all other basic services have..

...gone sky-high. Healthcare premiums are astronomical, if you can even afford to pay for healthcare. Mortgages are also very high, despite the low interest rates.

How does the average middle-class American save anything under these conditions?

And we know that the poor can't save anything because they are barely surviving day-to-day.

Gee, when was it that we had a huge national budget surplus? Wasn't that when we last had a real elected President who seemed to care about EVERY American?