WASHINGTON (AP) — Americans are making a little more money and spending a lot more.
Under normal circumstances, that would be a troubling sign for the economy. But a closer look at some new government figures suggests another possibility: People are saving less money because they’re earning next to nothing in interest.
Saving is already difficult because of more expensive gas and food. It’s even tougher because of the lower returns — the flip side of super-low interest rates that the Federal Reserve has kept in place since 2008 to help the economy.
Critics say the Fed is punishing those who play by the rules — those careful enough to set aside money for savings or people who built up a nest egg and are living on fixed incomes that depend on interest.
Americans spent 0.6 percent more in September, three times the increase from the previous month, the government said Friday. Spending was especially strong on durable goods — things like cars, appliances and electronics.
At the same time, what they earned was mostly flat. Pay increased 0.3 percent, and overall income just 0.1 percent. After deducting taxes and adjusting for inflation, income fell for a third straight month.
So to make up the difference, many have cut back on savings. The savings rate fell to its lowest level since December 2007, the first month of the recession — and right about the time the Fed started its dramatic series of interest-rate cuts.
Considering how little you can get for parking your money at a bank, it hasn’t been a tough choice.
“Consumers have hit a level of saturation in their savings,” said Marshal Cohen, chief industry analyst with market research firm The NPD Group. “The propensity is to spend.”