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.
French toast with enough saturated fat to last a week, a burger with more than three days worth of sodium and a stack of seafood with more than a day's worth of calories top this year's Xtreme Eating list. More
Instagram unveiled a new app this week called Bolt that mimics Snapchat's messaging functions. More
Restrictive immigration policies prevent talented entrepreneurs from launching businesses in the U.S. So, they're moving to Canada. More
Steve Mason, a pastor from California, inherited more than $100,000 in student loan debt when his 27-year-old daughter died suddenly in 2009. With interest and late penalties, the debt has since ballooned to $200,000. More