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 18,473.75 -19.31 -0.10%
Nasdaq 5,110.05 12.42 0.24%
S&P 500 2,169.18 0.70 0.03%
Treasuries 1.56 -0.01 -0.51%
Data as of 12:23am ET
Company Price Change % Change
Freeport-McMoRan Inc... 12.68 0.30 2.42%
Bank of America Corp... 14.53 0.16 1.11%
Apple Inc 96.67 -0.67 -0.69%
Gilead Sciences Inc 81.05 -7.50 -8.47%
Chesapeake Energy Co... 5.35 0.21 4.09%
Data as of Jul 26
Sponsors

Sections

HSBC banker arrested at JFK airport as he prepared to leave the country. He and former trader face federal charges they manipulated currency trades. More

Bernie Sanders takes credit for forcing for forcing Hillary Clinton and the entire Democratic Party to get a lot tougher on Wall Street. But how likely is that to happen? More

This is where Tesla plans to build enough lithium ion batteries to catapult Tesla's electric vehicles into the mainstream. More

Only 3% of employers offer so-called "vacation stipends" that help pay for their employees' vacations. But those that do make taking time off a must. More