According to the Commerce Department, personal income climbed 0.4% during November, which is the largest increase in the past six months. Additionally, personal spending increased by a modest 0.5% in November as well.
While it’s good to see these numbers increasing, it should be noted that the gains in both personal income and personal spending came in below economists’ expectations.
The personal savings rate came in at 4.7% of disposable income for November, which is the same percentage as October.
Back during the boom years, when home prices were skyrocketing and credit was easy to come by, it was not unusual to see the personal savings rate come in at negative number, meaning people were spending more than they were bringing in.
However, as the recession took hold, credit became harder to obtain and consumers started to restock their savings, causing the personal savings rate to climb back to a much more comfortable and economically sustainable percentage.
While this reverse in saving habits likely made the economic downturn slightly worse due to the fact consumer spending makes up about 70% of the United States’ GDP, in the long run it is what’s best for a healthy economy. Savings helps to foster investment and real, sustainable growth across the entire economy, not just in consumption driven areas.