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.
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.
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.
Nike is opening up shop on Amazon.com and the company plans "big shifts" over the coming year. More
The GOP's years-long quest to repeal what Republicans derisively refer to as the "death tax" may be realized if tax reform happens. But the arguments to repeal the estate tax overlook a few key details. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
These expenses are common, so why not save for them? More