Americans bought a lot more stuff in December than economists thought they would. Consumer spending rose 0.4 percent in the last month of the year, compared with the 0.2 percent rise that 81 economists surveyed by Bloomberg had predicted. Overall, U.S. consumers finished 2013 spending faster than they have in three years, with household purchases up 3.3 percent.

That’s great news for the economy, seeing as how something like 70 percent of U.S. gross domestic product is fed by household consumption. But it’s been a rough few months for the country’s piggybanks. It looks like a lot of the money that bought all those washing machines and flat-screen TVs during the last three months of the year came from people’s savings accounts.
In September, Americans were saving more than 5 percent of their disposal income. That’s now down to 3.9 percent, which is the rate at which Americans were saving at the brink of the financial crisis in September 2008.

Americans are spending more and saving less
Americans are spending more and saving less
Bloomberg data

As a rule of thumb, I’d say you probably don’t want to be doing something at the same rate you were doing it in the days before the world collapsed. But that’s just me.

Although the crisis led to a sudden bump in savings rates, Americans overall are socking away a lot less of their money than they used to. That says something about how frugal previous generations were, but it feels as though it says more about consumption habits over the past decade or so. Through the 1960s and 1970s, Americans saved more than 10 percent of what they earned. That hovered around 8 percent for much of the 1980s and 1990s. By the mid-2000s, it was below 3 percent.

Of course, when the savings rate shot up in 2007, it presaged the coming economic slowdown. To keep household spending on track through this year, either savings rates need to continue to fall or incomes need to rise. Given the past 20 years of wage stagnation, one of those seems more likely than the other.

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