Consumer Spending Up, Saving Rate Down

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The most recent data release from the Bureau of Economic Analysis shows that personal consumption expenditures increased 0.4% in November after a 0.8% gain in October. It is the ninth consecutive increase since March 2018. Adjusted for inflation, real personal spending was up by 0.3%. On a year-over-year comparison, real personal spending increased 2.8% in November.

Personal income climbed 0.2% in November, largely driven by gains in wages and salaries. Disposable personal income, income remaining after deducting personal income taxes, also inched up 0.2% after accounting for inflation. It has been rising steadily since July 2017 and it is 2.8% higher than a year ago.

The saving rate went down to 6.0%, as a result of spending increasing faster than income. It was the lowest level since March 2013. After 2016, the savings rate stayed in the 6%- 7.5% range, according to the July major data revision. The savings rate rose with the onset of the Great Recession as households repaired their balance sheets. However, this process of deleveraging held back GDP growth due to reduced consumption.



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