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Friday, May 28, 1999 Published at 13:43 GMT 14:43 UK

Business: The Economy

Spending soars in America

More jobs means more spending

The economic boom in the US shows no signs of running out of steam, according to latest figures.

Personal income and spending rose substantially in April, with spending rising 0.4% for the month, while income was up 0.5%.

The earnings figure was ahead of analysts' expectations.

Spending in March was revised upwards as well.

It is consumer spending, which accounts for two-thirds of the US economy, that is powering the longest economic boom in peacetime American history.

At an annual rate, Americans are now spending $6.1 trillion a year.

Consumers are far wealthier than they were five years ago - with increases in stocks and housing values particularly benefiting the higher income groups.

But job prosperity has spread throughout the income brackets, boosting personal income further down the social scale too.

Savings gap

However, consumers are increasingly drawing down their savings in order to continue to spend.

In April savings went down by 0.7%, matching the highest figure on record - which was for the previous month.

Households are withdrawing money from their savings accounts at an annual rate of $43bn.

The low savings rate has led to fears that if the stock market were to crash, consumers would be left with huge debts and would need to sell even more shares to pay them off.

Interest rate fears

The booming economy has kept US economic growth above 4% this year, far higher than in the other main industrial countries.

However, the US central bank, the Federal Reserve, has warned that interest rates might have to go up if the boom continues.

Alan Greenspan, head of the Federal Reserve, is worried that a shortage of workers will force up wages.

The strong growth of private sector wages and salaries, which increased by 0.6% in April, could add to his worries.

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