Consumer income exceeds spending (!)

News today from the Commerce Department says that consumer incomes rose 0.4% in December. Yet, despite this, consumer spending only rose 0.2%. I consider this to be good long-term news.

Analysis: Quick, what got us into the economic debacle of the past two years? Many might say excess mortgage lending. But I would argue that the real cause was the United States’ overuse and misuse of debt both at the business and consumer level. In fact, consumer savings rates in the United States were actually negative for awhile. This means that folks, on average, spent more than they earned. That is not a sustainable outcome, long-term as eventually things have to be paid for. So this data from the Commerce Department says that folks made more money in December – just barely. But even though they had more money they only spent about half of that increase in income. That means that the remaining half was saved. This is a good thing.

Unfortunately, the data for the previous month, November, showed that the U.S. consumer spent 0.2% more than they earned. So, December may just have been a catch up as the two months’ worth of data zero-out. I have been tracking this data for the past year, though and, on average, the U.S. consumer seems to be turning into a saver. This is sustainable long-term.

Importance grade: 3; while U.S. consumers saving more than they spend is a great thing, this is only one month’s worth of data. However, this is an important series of statistics to continue to track. Ideally, the long-term trend will start to show the U.S. becoming a net-savings nation.

Jason