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Consumer Spending Ticks Up--Kinda

Posted by Mike Werling | March 27, 2009
URL: http://www.entrepreneur.com/blog/218415
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For business owners looking for potential good news about the economy, February provides a mixed bag on the consumer front--the most important front for biz owners and the economy as a whole, really.

The latest Commerce Department Bureau of Economic Analysis data show a couple of things. One, personal income fell by more than $29 billion, or roughly 0.2 percent, largely due to a 0.4 percent decline in wages and salaries--the largest component of personal income. Not surprisingly, given the drop in income, disposable personal income fell by 0.4 percent, after a 1.3 percent surge in January.

Consumer spending. Now that's where it gets interesting.

Disregarding price changes, consumer spending jumped 0.2 percent. Real consumer spending, however, decreased 0.2 percent when adjusted for price changes. Consumers were up against a 0.3 percent rise in prices during February, which was tough in the face of a drop in personal income.

Consumers may be waiting out the current downturn before spending again, which could be good news for businesses that ride out the recession. Personal saving, a number that actually fell into negative numbers just a few years ago, is up. As a percentage of disposable income, saving was up 4.2 percent in February. That's lower than January's 4.4 percent, but it's well above the 12-month average of 2.5 percent.

And it may mean that Americans will have money to spend when things turn around and they feel comfortable purchasing again.