WASHINGTON — Americans’ savings may burn a hole in their pockets during the holiday-shopping season after consumer spending took a breather in the third quarter.
Household purchases, which account for almost 70 percent of the economy, climbed at a 1.8 percent annualized pace in the third quarter, while incomes after taxes and adjusted for inflation rose 2.7 percent. That pushed up the saving rate to 5.5 percent in the three months ended in September, the highest quarterly level since the end of 2012.
The extra funds give households some spending ammunition as the holidays approach and will probably provide a boost to fourth-quarter growth. Emboldened by gasoline prices at their lowest in almost four years and a job market closing in on its best performance since 1999, consumers have the wherewithal to loosen their purse strings.
“All of those factors combined with increased consumer confidence set the stage for a very nice holiday shopping season,” said Michelle Girard, chief U.S. economist with RBS Securities Inc. in Stamford, Connecticut, who expects fourth- quarter growth in consumption of about 3 percent. “There’s a good deal of savings that could be drawn down.”
Gross domestic product grew at a 3.5 percent annualized rate last quarter after a 4.6 percent gain in the previous period, Commerce Department figures showed Thursday in Washington. It marked the strongest back-to-back readings since the last six months of 2003.
Cheaper prices at the gas pump and lower home-heating bills will help Americans make the most of their paychecks after the biggest drop in crude oil prices since the global financial crisis. A gallon of regular gasoline cost an average $3.01 yesterday, the lowest since December 2010, according to AAA, the nation’s largest motoring group.
Payroll gains have averaged 227,000 a month through September. Sustaining such a pace through December would make 2014 the best year for the labor market since 1999.
The outlook has been brightening the moods of American households, with consumer confidence this month jumping to a seven-year high, according to figures from the Conference Board.
The higher saving rate may reflect a dialing back in spending by wealthy households, who command a larger share of assets and have a greater ability to tuck money away compared with lower-income families, said Michael Madowitz, an economist at the Center for American Progress in Washington.
“It’s tempting to interpret today’s reported 5.5 percent personal savings as evidence that consumers have the resources to spend freely, but other data tell us that this is concentrated at the upper end, which hasn’t been what’s holding back consumer spending,” Madowitz wrote in an email.
Still, increases in total earnings that come with the improving job market mean lower-income households may soon feel comfortable spending more, which would provide a bigger boost to consumption, Girard said.
“A lot of the spending that we’ve had in the expansion has been driven by upper-income earners,” she said. “That’s changing.”
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