Both March Income and Spending rose as expected, up .3% and .6% respectively. With the greater rise in spending, the Savings Rate fell to 2.7% from 3% and has now fallen to the lowest since Sept ’08. Because of a .1% rise in the PCE price deflator, real income was up .2% and real spending rose by .5%. The drop in the savings rate and increase in tax refunds has helped consumer spending over the past few months at the same time income growth and job hiring has been muted so in order to sustain, we need the latter to take the baton from the former. Government policy, whether thru zero interest rates or cash for clunkers, cash for appliances, cash for caulkers, and the home buying tax credit do not encourage savings unfortunately but these fiscal incentives are about to fully expire. Who knows when Fed monetary policy will encourage savings? Net-net for the markets, this data was mostly included in the GDP report on Friday so won’t be market moving.

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3 Responses to “Income and Spending in line but Savings Rate drops again”

  1. moneymcbags says:

    Money McBags with thoughts on consumers spending more than their incomes are growing.

    Bottom’s Up,

    Money McBags

  2. VennData says:

    This is America. Principia Mathematica defines America as “Savings = Zero.” Nothing will change that.
    We’re a country of crazed consumers. You will not stop us from shopping until you take our credit cards from our cold, dead hands.

  3. [...] this spending blip may be simply fueled by tax refunds, meaning it should stay in May but swoon by [...]