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After-tax incomes showed no growth in November. The savings rate dipped to 3.5 percent of after-tax incomes, down from 3.6 percent in October. Both months marked the lowest savings rate since late 2007. They show that consumers are having to tap their savings to finance their spending because of the weak income growth. The small rise in overall consumer spending was puzzling given that other reports have shown solid holiday shopping this season. Those reports had caused many economists to revise up their growth forecasts for the current quarter. Analysts at JPMorgan think the economy is growing at an annual rate of 3.5 percent in the current October-December quarter. That would be up from 1.8 percent growth in the July-September quarter and would be the best quarterly gain since the spring of 2010. Economists still expect that growth to be driven by an improvement in consumer spending, which accounts for 70 percent of economic activity. Spending rose at a 1.7 percent rate in the third quarter, more than double the second-quarter gain. JPMorgan analysts expect consumer spending to grow at a 3 percent pace in the current quarter. Even with the spurt of activity at the end of the year, economists think growth for all of 2011 will be a lackluster 1.7 percent. They had much higher expectations when the year began. But then a spike in gasoline prices held back consumer spending for other items. And the earthquake in Japan disrupted supply chains for auto and electronic parts, dampening factory production in the United States. Many analysts do not expect growth in 2012 to be significantly better than in 2011. JPMorgan economists predict the economy will expand 1.9 percent in 2012, only slightly better than this year.
[Associated
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