All hail the housing ATM
The American consumer turned in his/her third lowest personal savings rate of the year in December, -0.7%.
Personal outlays -- PCE, personal interest payments, and personal current transfer payments increased $81.3 billion in December, compared with an increase of $49.8 billion in November. PCE increased $80.2 billion, compared with an increase of $48.6 billion.And remember that this massive consumption in lieu of income delivered only a ho-hum Christmas season for US retailers.
Personal saving -- DPI less personal outlays -- was a negative $67.4 billion in December, compared with a negative $21.6 billion in November. Personal saving as a percentage of disposable personal income was a negative 0.7 percent in December, compared with a negative 0.2 percent in November.
There will be minor revisions to come, of course, but we now have the first clear look at the personal savings rate for all of 2005: -0.5%, down from 1.8% in 2004. Not only is the US running the first negative personal savings rate since 1933 (yes, I know you're getting sick of hearing that from me, but it bears frequent repeating and at least the press is picking up on it too). This is an incredibly steep descent as well, -230 basis points in a single year. The last time one can find such rapid abandonment of saving out of income in the US was 1947 when the country was at the tail end of a three year period of dissaving after years and years of pent-up demand due to WW2. The lowest the saving rate ever reached then, however, was +4.3%.
Well, as long as the East Asians want to stick more and more of their growing and growing reserves into the US housing sector, some Americans can go on using their homes as ATMs. In fact, it seems the only way to keep the US economy -- and the global economy -- from plunging into recession.