Americans Aren't Making More, but They're Spending More

Personal income stayed steady as spending advanced 0.4% for December.

Jan 31, 2014 at 11:03AM

Americans aren't making any more money, but they're spending more, according to a December Personal Income and Outlays report (link opens as PDF) released today by the Commerce Department. 

Investors watch income and spending habits to gauge consumer sentiment. Income serves as a leading indicator of spending, while spending rates help investors understand the sustainability of consumption-based growth.

After advancing 0.2% for November, personal income stayed steady last month. Analyst estimates had called for another 0.2% gain, however The Wall Street Journal noted that income's disappointing results may be partially due to weather.

For the same period, personal spending increased 0.4% on top of November's revised 0.6% boost. Analyst predictions proved overly conservative, having expected a smaller 0.2% bump. Even accounting for price increases, real spending saw a 0.2% rise for December.

In a potential sign of longer-term economic pessimism, durable goods spending dropped off 1.8%, erasing November's 1.8% gain. Nondurable goods added to their 0.2% November bump with a 1.5% December increase.

Looking back over the past 12 months, personal income is down 0.8% comparing December 2013 to December 2012, while December personal spending has advanced 3.6%. 


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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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