American consumers' "living beyond their means" worsen: spending growth exceeds income, savings rates decline to a three-year low.

According to data released by the Bureau of Economic Analysis (BEA) on Thursday, income growth in the United States is falling further behind consumer spending, forcing Americans to dip into savings and raising concerns about the sustainability of robust household demand - which is the main engine of the US economy. The data shows that in November, adjusted for inflation, personal consumption expenditure increased by 2.6% compared to the same period last year. In contrast, real disposable personal income only increased by 1%, marking the smallest annual growth since 2022. As a result, the personal savings rate has dropped to the lowest level in three years. The slowdown in the labor market has translated into a cooling of wage growth, while inflation continues to show strong resilience. "This is forcing many American households to support their spending through dipping into savings or taking on debt - both of which are unsustainable," said Gregory Daco, Chief Economist at EY. Income growth falls behind consumer spending in the United States However, many economists point out that the steady growth in consumer spending is mainly driven by affluent households benefiting from the rise in the stock market. In addition, economists at Wells Fargo, Tim Quinlan, Sarah House, and Shannon Seery mentioned in a report that the larger tax refunds this year, thanks to the "Great Beautiful Act" passed last year, should help maintain a healthy pace of consumption until 2026. But Daco believes that if income growth continues to be weak, consumers may use these higher refunds to pay off debt and bolster savings, in which case the refunds may not necessarily stimulate consumption. Veronica Clark, economist at Citi Group, said, "If labor income is slowing down and the savings rate is low, I still expect consumer spending to slow down."