Consumer Spending, Income, and Saving – Disturbing News?
The Bureau of Economic Analysis (part of the U.S. Department of Commerce) today released its report on personal incomes, spending and saving by consumers nationally. This data is for activity in June 2009. It has Mr. ToughMoneyLove scratching his head a bit. I’m not sure yet what it means but my first reaction is concern.
Personal incomes dropped by 1.3 percent in June after increasing by the same amount in May. The May boost can be attributed to the one-time payments from the Obama stimulus package. Most economists had expected personal incomes to fall by only 1 percent. The bureaucratic term for personal income is “disposable personal income” or DPI. It appears that we are still quite good at the “dispose” part.
So if spending went up and incomes went down, what does this mean for our national propensity to save? That’s right folks, deep down we don’t like to save. The June data may indicate that we are reverting to our old habits. Personal savings as a percentage of disposable personal income dropped to 4.6 percent in June, compared with 6.2 percent in May. Ouch.
I realize that consumer spending represents 70% of our national economy but please folks, can we not be so quick to re-work the spending vs. saving ratio?
What happened to learning better habits in the world of personal finance?
Perhaps I am overreacting without proper analysis. What do you think?
Photo credit: Jake Wasdin