Consumer Income and Saving Growth Outpaces Spending - Update
U.S. consumers increased their earnings and savings at a rate beyond their spending in December 2009. This is a change from consumers’ financial habits in November 2009, when spending slightly outpaced the growth rate of consumer income and essentially matched the growth rate in personal saving.
According to the monthly Bureau of Economic Analysis Personal Income and Outlays report, U.S. consumers’ personal consumption expenditures (PCE), which essentially reflect consumer spending, increased $22.6 billion, or 0.2%, for the month. In contrast, PCE rose 0.7%, or $64.5 billion, in November 2009.
Consumers were thrifty with their spending in December, as personal income rose 0.4%, or $44.5 billion, and disposable personal income (DPI), which represents personal income less current personal taxes, also rose 0.4%, or $45.9 billion. In November, consumers increased spending at a rate slightly higher than their personal income and DPI growth rates.
Personal saving, which has undergone some radical monthly shifts since June 2009, increased a strong 5.5%, or $27.9 billion, rising from $506.3 billion to $534.2 billion. Personal saving grew 1.6% in November. Earlier this year, personal saving experienced severe declines of 34.5% in August, 10.4% in July and 26.3% in June; but dramatically reversed course in September, increasing 15.8%. However, in October consumers needed to support their increased spending and decreased saving by a relatively moderate 3.9%.
December Retail Sales Slightly Drop
A comparison with the December 2009 Advance Monthly Retail Trade Survey from the Census Bureau shows that U.S. retail and food service sales slipped 0.3%, from $353.9 billion to $353 billion. rose 1.3%, from $347.5 billion to $352.1 billion. U.S. retail and food service sales have been in a seesaw pattern in recent months, with sales falling 1.5% in September and 0.2% in July, but rising 1.3% in November, 2.7% in August and 1.4% in October.