St Louis Adjusted Monetary Base (Graph)

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Consumers Spend Less, Boost Savings

Consumers spend less--not a good thing. Retail sales account for about two thirds of GDP. Consumers save more--a good thing. They won't like it in Washington because when consumers start saving it does not translate into demand. You will notice not a word about savings coming out of Washington. The reality, however, is that longer term savings can translate into investing--also a good thing. Too bad Washington is not paying more attention to people when dreaming up the next political solution to our still growing economic problems.

Personal saving as a percentage of disposable personal income was 3.6% in December, the highest since 4.8% in May 2008. It was 2.8% in November.

Monday's income and spending data showed disposable personal income -- income after taxes -- fell by 0.2%, following a 0.3% decrease in November.

U.S. construction spending took its third tumble in a row during December as the housing slump wore on, the commercial sector fell, and government outlays dropped.

Total spending decreased by 1.4% at a seasonally adjusted annual rate of $1.054 trillion compared to the prior month, the Commerce Department said Monday. Spending fell 1.2% in November; originally, November spending was seen 0.6% decline. October outlays dropped 0.7%.

Construction spending for 2008 dropped a record 5.1% to $1.079 billion from $1.137 billion during 2007.

Consumers Spend Less, Boost Savings

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