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 16,182.12 -345.91 -2.09%
Nasdaq 4,692.52 -83.99 -1.76%
S&P 500 1,931.66 -40.52 -2.05%
Treasuries 2.17 -0.03 -1.18%
Data as of 12:21pm ET
Company Price Change % Change
Bank of America Corp... 15.76 -0.58 -3.58%
Apple Inc 110.83 -1.93 -1.71%
General Electric Co 24.03 -0.79 -3.18%
Freeport-McMoRan Inc... 9.82 -0.82 -7.71%
Ford Motor Co 13.84 -0.03 -0.22%
Data as of 12:06pm ET
Sponsors

Sections

Welcome to September. Stocks started the historically worst month of the year with another big pullback after two new reports show more weakness in China's manufacturing sector. More

Iran could be pumping more than four million barrels of oil a day by the end of 2016, the country's oil minister tells CNN in an exclusive interview. More

Apple accounts for more than 225,000 jailbroken iPhone owners were hacked with a new kind of malware called KeyRaider. More

How do you run a successful crowdfunding campaign? Indiegogo's CEO Slava Rubin offers his top tips and mistakes to avoid. More

Joe is 50 years old and makes $70,000 a year. He should already have $364,000 saved for retirement. Are you on track? More