Every month, the federal government produces a study on consumer saving and spending rates. The figures are often seen as indicators for how well the economy is doing. Some lawmakers are calling the investing report a poll on how Americans feel about the payroll tax cut. Source for this article – Consumer spending report shows improved savings rate by MoneyBlogNewz.
January personal revenue
There were some shocks in the United States Commerce Department report on personal earnings and investing that comes monthly. Overall, personal income increased about 1 percent to $133.2 billion. In the U.S., there is a $428 per person increase in power investing. There was an increase in disposable earnings of less than 0.7 percent because of Increased costs of fuel, food and housing. Some figures put the increase in “real” disposable earnings at even less — about 0.4 percent.
Rate of personal spending increases
While personal earnings did go up during the month of Jan, personal spending did not go up at the same rate. Overall customer spending in the United States went up by about 0.2 percent. Customers were saving more money. That’s where the rest of the personal revenue increase went. As a whole, Americans saved about $677.1 billion in January of 2011. This puts the personal savings rate at more than the increase in personal earnings. This higher savings rate indicates that customers are being much more cautious with their money. Since the increase is coming through a decrease in taxes rather than in a lump sum, it’s being put towards savings rather than spending.
Why the figures matter
Most economists predict the future based off reports. The saving and investing rates are incorporated in this. The estimations about savings, investing and earnings aren’t always exactly right. The American consumer spending change is an attitude that has real importance. Americans spent more money than they were making for years before the economic collapse. The increased savings rate technically will slow down overall economic recovery because it means less money is going to the economy. With individuals needing less credit and avoiding high-risk financial merchandise, it is really good for long term recovery to have a higher savings rate. This reduced demand means the United States financial system could develop a more stable base and weather future downturns more very easily.