US stimulates savings more than spending

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. But 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 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 concern, 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 be spent.