Americans must be feeling a little more comfortable about the economy. They've now increased their spending for five months straight, according to the Bureau of Economic Analysis. Part of the reason why might be that income has fairly steadily risen over the past year. In November, these two trends continued, with income increasing by 0.3% and spending rising by 0.4%. But when spending rises more than income, saving takes a hit. It declined for the third month straight.

Here's the chart for income and spending:

income spending 2010-11.png

There are a few things to note. First, you can see how spending (red line) took off in July. It has grown at an annualized rate of $193.7 billion over that short period. Personal income growth hasn't been as consistent, however. It sunk all the way to zero in September, but has grown over the past two months.

Another observation from this graph is that the red line has been above the green one for three months now. That means saving has been declining. Here's its chart:

saving 2010-11.png

You can see that this trend really extends back to July, as in August the slight 0.3% rise was really just a blip. Since June, saving has declined at an annualized rate of $105 billion. So a fair amount of that additional spending we've seen over the past several months has come at the cost of saving.

These statistics are somewhat bittersweet. It's nice to see consumers feeling confident enough about the economy to spend more, but it's unfortunate that saving is slowing. This suggests that the desire to save that Americans developed during the recession could have just been a temporary phenomenon, rather than a paradigm shift.


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