by Calculated Risk on 3/01/2010 08:30:00 AM

From the BEA: Personal Income and Outlays, January 2010

Personal income increased $11.4 billion, or 0.1 percent, and disposable personal income (DPI) decreased $47.6 billion, or 0.4 percent, in January, according to the Bureau of Economic Analysis. ... Personal consumption expenditures (PCE) increased $52.4 billion, or 0.5 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.3 percent in January, compared with an increase of 0.1 percent in December.
...
Personal saving -- DPI less personal outlays -- was $367.2 billion in January, compared with $467.9 billion in December. Personal saving as a percentage of disposable personal income was 3.3 percent in January, compared with 4.2 percent in December.

Click on graph for large image.

This graph shows the saving rate starting in 1959 (using a three month trailing average for smoothing) through the January Personal Income report. The saving rate fell to 3.3% in Januayr.

I expect the saving rate to rise over the next couple of years - possibly to 8% or more - slowing the growth in PCE.

The following graph shows real Personal Consumption Expenditures (PCE) through January (2005 dollars). Note that the y-axis doesn't start at zero to better show the change.

The quarterly change in PCE is based on the change from the average in one quarter, compared to the average of the preceding quarter.

The colored rectangles show the quarters, and the blue bars are the real monthly PCE.

The increase in PCE in January was fairly strong (a 3.3% annual rate over the last three months), but incomes barely increased as the saving rate fell. I expect spending to slow and the saving rate to increase over the next few quarters.