WASHINGTON — Households raised their savings rate to the highest level in more than 15 years in May as many used a big boost in money from the government’s stimulus program to bolster nest eggs rather than to spend more. Still, with consumer spending expected to stay subdued, a sustained economic recovery seems doubtful anytime soon.
The biggest chunk of the income gain in May came from $250 payments for more than 50 million Americans receiving Social Security and other government benefit programs. In all, $13 billion of the one-time payments were mailed last month.
Millions of other workers benefited from the tax-credit part of the $787 billion stimulus plan. That program provides up to $400 for individuals and up to $800 to married couples. Workers began receiving that benefit in April in the form of less money withheld from pay, averaging about $10 per weekly paycheck.
The bigger Social Security benefits pushed incomes up 1.4 percent in May, the biggest gain in a year. Yet it did not cause a similar jump in spending. Consumer spending rose only 0.3 percent.
Instead, Americans used their government windfalls mainly to boost savings. The personal savings rate, which was hovering near zero in early 2008, soared to 6.9 percent in May. That was a 1.3 percentage-point gain from April and the highest rate since 1993.
That Americans used most of their government stimulus payments to boost savings rather than increase spending worried investors on Wall Street. They’re concerned that the stimulus package that President Barack Obama pushed through Congress might not achieve the desired effect of helping revive the economy.
The Dow Jones industrial average fell 34 points to 8,438.39. Broader stock averages were mixed.
Private economists also expressed concerns, saying the next few months will be vital in determining whether the stimulus package works. Many still think about two-thirds of the stimulus payments will end up being spent. That would be similar to the outcomes in previous government stimulus programs in 2001 and 2008. And it could deliver enough of an economic punch to end the recession.
But analysts said high levels of layoffs or a further surge in energy prices could derail any recovery. Record-high energy prices last year dampened the effectiveness of a stimulus effort then.
“The next three to six months will be the moment of truth that will determine whether the stimulus effort will be enough to break this very vicious cycle,” said Mark Zandi, chief economist at Moody’s Economy.com. “I am hoping that somewhat firmer retail sales this summer and fall will convince businesses to scale back on their job cuts.”
One concern is that the recession, which began in December 2007, has so rattled consumers that they will keep raising their savings rate to replenish their bank and investment accounts. Those savings have been shredded by the fall in housing and stock prices.
Some analysts say the savings rate could rise to 10 percent. But Nigel Gault, chief U.S. economist at IHS Global Insight, said he expects it to stabilize in coming months in the 6-to-7 percent range.
“We expect spending to creep slowly higher in the second half of the year as the labor market deterioration becomes less severe,” Gault said.
The reductions in payroll withholding taxes helped boost after-tax incomes 1.6 percent in May, the Commerce Department said. Without all the one-time benefits from the stimulus program, after-tax incomes would have risen only 0.2 percent.
The rise in the savings rate — which is a percentage of disposable income — to 6.9 percent was far above the rates of less than 1 percent from 2005 to 2007. In those years, many Americans spent with abandon as soaring home prices and a stable stock market made them feel secure about their finances.
The government said this week that the overall economy, as measured by the gross domestic product, shrank at an annual rate of 5.5 percent in the January-March quarter. That was slightly less severe than the 5.7 percent decline estimated a month ago. The 5.5 percent drop followed a 6.3 percent decline in the last three months of 2008 — the worst six-month economic performance in more than a half-century.
Economists say the 0.3 percent rise in spending in May should help bolster the economy in the current second quarter and translate into a smaller drop in GDP of around 2 percent.
Most analysts expect the economy to begin growing again in the second half of this year. But the rebound is likely to be mild, partly because consumers aren’t expected to return to the spendthrift days of the housing boom.
“We think Americans will need to maintain their current elevated savings rates for a couple of years to restore household balance sheets,” said Sal Guatieri, an economist at BMO Capital Markets.

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