Americans' Income, Spending, and Saving All Rose in August

By Daniel Indiviglio

Personal income in the U.S. grew in August at the fastest pace so far this year, according to data released today by the Bureau of Economic Analysis. The month's 0.5% increase matches that in December 2009. Spending also remained relatively high in August, matching July's brisk rise of 0.4% growth. Since income exceeded spending, it should come as no surprise that saving also increased during the month. This is all good news.

Here's a chart showing income and spending over the past year:

income spending 2010-08.png

You can see that all three lines have remained pretty stead between 0% and 0.5% growth. In August and September of 2009, spending was quite volatile, mostly due to the cash-for-clunkers program.

Here's saving:

saving 2010-08.png

There's been a lot more variation in how much people have saved from month to month over the past year. But you can see that saving grew in August the most since May. Americans saved $662 billion during the month.

One interesting thing to note, however, is that saving hasn't changed much as a percentage of disposable income. That ratio was 5.8% during the month, which is slightly more than the 5.7% portion in July. July's ratio was also the average for the year.

So October begins with some good economic news about August. It's important that income grows so that Americans have more money to spend to stimulate the economy. The fact that spending was relatively strong isn't very surprising, however, considering that consumer confidence grew during the month as well. Unfortunately, in September sentiment appears to have fallen, which means spending may have as well during the month.

This article available online at:

http://www.theatlantic.com/business/archive/2010/10/americans-income-spending-and-saving-all-rose-in-august/63890/