Both personal income and consumption spending were essentially flat in June, according to the Bureau of Economic Analysis. Annualized income grew by just $3.0 billion during the month, the smallest amount since September 2009. Disposable income was also flat in June, rising by just $5.1 billion. Meanwhile, personal consumption actually fell slightly, by $2.9 billion. Some of that difference was plowed into saving, which was up 1.7%.
Here's a chart showing the month-over-month change in personal income, disposable income, and spending since a year ago:
Wherever you don't see the green line for personal income, it's directly beneath the purple line for disposable income. As you can see, income growth has been declining since April, after it rose in the beginning of the year. Spending, however, has been settling around the horizontal axis, indicating little to no growth.
Within personal outlays, the major category with the largest decline was non-mortgage interest payments, which were down 2.4%. This likely implies that Americans owed less interest because they are paying off their debt, rather than using credit to purchase more goods and services.
Savings growth also declined in June. Here's its chart:
You can see that it peaked in April, but has declined since then. Yet considering how little income growth we've seen since that time paired with Americans paying off more debt, it's not surprising people have been saving less.
There are a few conclusions to draw about today's data. First, the declining income growth is not a good sign. Unless income grows, spending can't recover without people dipping into savings or using more credit. That partially explains why spending has been flat recently.
Even though savings was low, that people continue to save and pay down their debt even as their income remains flat shows that some nervousness persists on the part of consumers. Although it's a healthy shift to see Americans saving more of their income and relying less on credit, without more spending the recovery will be a very slow one. Businesses need to see consumer demand strengthen to convince them to ramp up hiring.
Note: All figures are seasonally adjusted and reflect changes in or quantities of current -- not inflation-adjusted -- dollars.
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