Rising gas prices didn't do anything to curb spending in February. Personal incomes rose by 0.3% during the month, but spending increased even more -- by 0.7%. That's the biggest increase in monthly spending since October, according to the Bureau of Economic Analysis. Of course, when spending rises faster than income, saving suffers. It declined by 4.8% in February. Still, this news is positive for the recovery.
First, here's the chart for income, disposable income, and spending over the past year:
You may recall that in January, Americans got a pretty significant spending boost thanks to the tax cut legislation passed in December. That was a one-time effect, however. The 0.3% increase in February is more in line with the modest monthly change we've seen over the past year. As is often the case, the rise in disposable income matched that of personal income.
But the real story this month is spending. Its 0.7% increase was the second most this year, as October 2010 beat it out very slightly, which can't be seen unless you carry the statistic out another decimal point. This indicates that Americans are, indeed, becoming much more comfortable spending more money.
The big increase could be due to two reasons. One might that it took people a month to realize that they have a little more money in their paychecks due to the tax break. Another could be that more Americans found jobs in the first two months of 2011, and spent more money as a result.