Echo

Saving is on the rise; consumers are cutting back

Monday, February 2, 2009

This morning, the BEA released its December personal income report. The news was slightly worse than markets expected and illustrates the continued decline in consumption, income, and prices. From the BEA:
Personal income decreased $25.3 billion, or 0.2 percent, and disposable personal income (DPI) decreased $25.1 billion, or 0.2 percent, in December, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) decreased $102.4 billion, or 1.0 percent.
The trend is clear: consumers are being forced to pull back, which is further evidenced by the downward revisions to November's release:
  • Personal income was revised downward from a -0.2% decline to a -0.4%
  • Real PCE was first estimated to jump 0.6% in November, but was revised downward to just a 0.3% increase.
But another trend is also clear: consumers are saving.

The personal saving rate is on the rise, currently 3.6% in December and up 2.4% since September. It is not clear whether or not this is a long-term behavioral shift...yet. But one thing is for sure: consumers are cutting back on their spending habits.

Rebecca Wilder

1 comments:

Janie February 2, 2009 at 10:22 AM  

I seriously doubt this is a long-term trend. When people are more comfortable with their situations and dollar cushions, they will start to spend part of the savings % again. It might well be that the savings rate will stay up for the future but not as much as it is now. With all the push to use credit (by the GOVERNMENT), it just can't last.

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