Friday, March 30, 2012
Spending surges, but incomes lag
Personal spending up sharply (0.8%) in Feb, blowing away all forecasts, however, personal income up only 0.2% and January was revised down, from an originally reported gain of 0.3% to 0.2%. The savings rate fell to the lowest level in three years.
Households are spending out of savings and taking on more debt because income gains are just not there, despite the increase in jobs. The spending is not sustainable under that arrangement. It can only last for so long—either people run out of savings or, their debt gets too high again and they cut back.
Personal Savings as a % of Disposable Income