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Washington - Americans are saving more and spending less, putting a choker on the economic recovery, data showed on Tuesday as the US government warned sky-high unemployment may yet worsen.
The American consumer - whose thirst for new products has been a mainstay of the global economy for decades - trimmed spending in June as salaries stagnated and more cash was saved, according to the latest Commerce Department figures.
Americans stashed away 6.4% of their income, the highest savings levels in a year and nearly triple the rate seen before the recession began in December 2007.
"The savings rate rose for the fourth month in a row and reached 6.4%, which is relatively high for the 'old-style' American consumer," said Natixis economist Thomas Julien.
The Commerce Department's figures also showed consumer spending decreased by $2.9bn - less than 0.1% - while income increased by roughly the same percentage.
"Consumers are pulling back," said IHS Global Insight economist Chris Christopher.
Consumer spending is a key driver of US economic growth, usually accounting for two-thirds of output.
The US authorities have been torn between encouraging consumers to spend more to speed the recovery, and avoiding a return to unsustainable debt levels that preceded the crisis.
But Americans, still spooked by the financial crisis and the weak labor market, appear to have made their choice.
Analysts warned that consumer spending would have decreased further but for an increase in energy bills linked to warmer-than-normal summer temperatures.
Other figures released on Tuesday showed consumer spending slowing on some big ticket items.
The National Association of Realtors reported pending home sales fell 2.6% in June, to its lowest level in nearly a decade and down 19% from this time last year.
The decrease followed May's sharp 30% decline on the expiration of a government homebuyer tax credit, and was worse than expected by analysts.
"Consumers are seemingly holding off on making new purchases until the employment situation stabilizes," said Jeffrey Rosen of Briefing.com.
Even Treasury Secretary Timothy Geithner warned that day may come later rather than sooner, saying that the country's unemployment rate could yet worsen.
In an interview with ABC, Geithner admitted that "it is possible you're going to have a couple of months when it goes up", as out-of-work Americans see the economy recovering and try to return to the labour force.
"When they see a little hope that there may be jobs out there, they start to come back in again. And that can cause the measured unemployment rate to go up - temporarily."
But Geithner insisted that the economy is "gradually healing" and that President Barack Obama's administration is doing all it can to aid that recovery.
All eyes will now turn to the latest unemployment statistics, published Friday, with analysts expecting the unemployment rate to rise to 9.6%, from the current rate of 9.5%.
- AFP
