EconoMonitor

The Wilder View

Saving is on the rise; consumers are cutting back

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.

saving_chart.PNG

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.


Originally published at the News N Economics blog and reproduced here with the author’s permission.

One Response to “Saving is on the rise; consumers are cutting back”

PessimistFebruary 2nd, 2009 at 8:03 pm

Rebecca:Perhaps you should look a little deeper into your analysis of ‘Savings on the Rise’.As I recall, in the national economic accounts reduction of household debt shows up as ‘savings’. As mortgage loans go into foreclosure the liabilities of the original homeowners are wiped off the board. A reduction in the debt load of some families maybe, but hardly an encouraging sign of intentional and productive ‘saving’.

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