Personal Income Growing, Barely

This morning the BEA released its estimate of personal income and spending in December. Income was up by 0.2% in December, while spending grew by 0.4%, in nominal terms. In real (inflation-adjusted) terms, income showed virtually no growth, while spending grew a little. This has continued a trend over the past few months of spending growing faster than income. What does that mean? A falling saving rate:

The falling savings rate (which is now lower than it was back in 2000, at the peak of the stock market boom) means that there’s very little scope for consumers to spend more unless their income starts rising. And unfortunately, consumer income is not growing very fast – over the last quarter of 2003, it grew at a 2.9% annual rate. In real terms, growth was even lower. That’s not fast enough to sustain more than a rather tepid expansion.