Income, Spending, and Saving All Rose in October

Americans got another good economic report this week about personal income, spending and saving. They all increased, according to the Bureau of Economic Analysis. Additionally, the income numbers since April were revised mostly upward. These statistics strengthen the argument that the U.S. economy continues to recover.

Let's start with the chart for income and spending:

income spending 2010-10.png

There are a few things to note about this chart. First, income and spending have both been growing pretty consistently over the past year. There were a few months when each were flat, but neither statistic actually declined over the period.

Second, October's numbers were quite a bit better than the decline in growth we saw for September. Last month, personal income matched August's 0.5% growth. Disposable income and spending also experienced solid growth of 0.4%.

As mentioned, today's report also revised the numbers going back to April. Here's how the picture changed for personal income. The new numbers are green, the old ones blue:

income revision 2010-10.png

You can see that the green line generally lies above the blue one, meaning that income performed better than we thought.

Saving also rose in October, but barely:

saving 2010-10.png

Just 0.8% saving growth isn't much to brag about, but it certainly beats September's 4.7% decline. Americans aren't as interested in saving recently as they were a year or two ago. Over the past six months average saving declined by nearly 1%.

Although less saving is a bad thing from the standpoint of Americans strengthening their balance sheets, there's a silver lining. If Americans are saving less as incomes rise, then this implies that they're becoming comfortable spending more. For firms to ramp up hiring, they must sense renewed consumer demand, and less saving appears to indicate that Americans they are consuming more goods and services.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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