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

Index Last Change % Change
Dow 16,204.97 -211.61 -1.29%
Nasdaq 4,363.14 -146.41 -3.25%
S&P 500 1,880.05 -35.40 -1.85%
Treasuries 1.85 -0.02 -0.86%
Data as of 1:36pm ET
Company Price Change % Change
Bank of America Corp... 12.95 -0.30 -2.26%
Facebook Inc 104.07 -6.42 -5.81%
Freeport-McMoRan Inc... 5.68 -0.04 -0.70%
Microsoft Corp 50.16 -1.84 -3.54%
General Electric Co 28.54 -0.64 -2.19%
Data as of Feb 5
Sponsors

Sections

Anheuser-Busch has been the exclusive beer advertiser featured during the Super Bowl since 1975, and it's spent more on Super Bowl advertising than any other company for the last five years in a row. More

The economy is better than it was, but not even President Obama is ready to declare it's booming. More

Laurie Segall sits down with Foursquare's new CEO Jeff Glueck to discuss the company's latest round of funding at a lower valuation, and their hybrid consumer/enterprise business model. More

Nonprofit JumpStart has launched a new $10M fund that will only invest in women and minority-led startups. The catch: You have to move to Ohio. More

Portland, Oregon, is often described as the last affordable cool city on the West Coast. But as more people move to the city, it's becoming increasingly unaffordable. More