Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Americans earn and spend more, save less

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney) -- As incomes slowly creep back up, Americans are spending more freely and saving less.

Personal income rose 0.4% in December, following a 0.4% increase in November, according to data released Monday by the Commerce Department.

Spending by individuals ticked up 0.7%, compared to a revised 0.3% spike the prior month.

How have your spending habits changed in the past year?
  •   Spending more
  •   Saving more
  •   No change
sponsored by

That's good news for the recovery, as economists look to increased consumer spending to help drive job growth in 2011.

"On the consumer end, we ended off the year on a pretty decent note" said Jennifer Lee, senior economist with BMO Capital Markets.

Meanwhile, Americans saved $614.1 billion in December, compared with $634.4 billion the prior month. And personal savings as a percentage of disposable income nudged down to 5.3% from 5.5% in November.

Economists expect disposable income to increase further in January, boosted by the 2% payroll tax cut that started at the beginning of the year.

Inflation at record low

The core Personal Consumption Expenditures price index, an inflation gauge that strips out volatile food and energy prices and is closely watched by the Federal Reserve, fell to 0.7% -- the lowest level on record since the Commerce Department started tracking the data in 1959.

It falls far below the 1.6% to 2% inflation range the Fed is looking for. The central bank has said that low inflation levels are a key reason behind its controversial policy of pumping $600 billion into the economy.

Prior to this year, the other record low for PCE inflation was last reached in November 1961, when it fell to 1.1% year-over-year, a Commerce Department spokesman said.  To top of page

Search for Jobs

Index Last Change % Change
Dow 19,827.25 94.85 0.48%
Nasdaq 5,555.33 15.25 0.28%
S&P 500 2,271.31 7.62 0.34%
Treasuries 2.47 0.01 0.33%
Data as of 9:39pm ET
Company Price Change % Change
Bank of America Corp... 22.64 0.11 0.49%
General Electric Co 30.53 -0.68 -2.18%
Bristol-Myers Squibb... 49.23 -6.26 -11.28%
CSX Corp 44.33 -1.18 -2.59%
Chesapeake Energy Co... 6.69 0.07 1.06%
Data as of Jan 20
Sponsors

Sections

Shares of several uranium miners are soaring this year on hopes that Donald Trump will commit more investments to nuclear power. But investors need to get careful. The stocks are as volatile as radioactive elements. More

President Trump issued an executive order rolling back Obamacare. Here's what's next for the health reform law. More

Samsung is blaming poorly designed and manufactured batteries for the overheating problems that caused some its Galaxy Note 7 phones to catch fire. More

If you're smart about when you first claim Social Security, you can increase your benefits and reap the rewards for the rest of your life. More