After rising for many months during 2014 and the first few months of 2015, monthly disposable income growth tapered off in early 2015 and has remained stable at roughly 4 percent per month, while consumer spending growth has drifted and the personal savings rate has risen, according to the most recent U.S. Department of Commerce data.
Personal disposable (after-tax) income rose by nearly 4 percent for the sixth straight month in October on a 12-month smoothed basis, slightly below the 4.1% increases of January, February and March, but well above the monthly increases seen in 2013 and most of 2014 as employers slowly added people back to their payrolls.
However, consumer spending, the metric that comprises 70 percent of GDP growth and is essential to economic stability, rose by only 3.4% in October compared to the same month last year. Personal consumption expenditure growth reached a 12-month high last November, but has steadily declined in virtually every month since, as shaky consumer confidence and low inflation has made it possible for people to do more with less.
The savings rate, or percent of disposable income tucked away in savings and investment, increased to 5.6% in October from 5.3% in September, continuing its steady rise of the past six months.
Consumer confidence has dropped in each of the past two months, according to research by from The Conference Board. In October and November, the consumer confidence index lost a total of 12 points, and now stands at 90.4. Both the Present Situation and Expectations Indices have been eroded by less favorable views of the job and housing markets and of near-term business conditions.
