Consumer Spending Up, Saving Rate Down


The most recent data release from the Bureau of Economic Analysis shows that personal consumption expenditures increased 0.6% in November following a downwardly revised increase of 0.2% in October. Adjusted to remove the price change, real personal spending was up by 0.4% after being virtually unchanged in October. This increase is mostly due to a higher spending on nondurable goods.

Personal income climbed 0.3% in November, largely driven by gains in wages and salaries. Disposable personal income, income remaining after deducting personal income taxes, inched up 0.1% after accounting for inflation. This is the third consecutive increase since September 2017. Disposable personal income ended up with a 2.0 % annual increase.

The saving rate went down to 2.9%, as a result of spending increasing faster than income. It was the lowest level since November 2007. The saving rate declined through the second half of 2016, and the downward trend continued in 2017. 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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