Friday, March 27, 2009

Personal Consumption Holding Steady

WSJ reports:

Americans spent at a slower rate in February as their income fell and they saved money at a historically elevated level to cushion against the recession. Personal consumption rose 0.2% compared to the month before, the Commerce Department said Friday. Spending had increased a revised 1.0% in January; originally, spending was seen up 0.6%.

Personal income in February fell at a seasonally adjusted rate of 0.2% compared to the month before. Income increased a revised 0.2% in January; originally, income for that month was seen 0.4% higher.

Personal saving as a percentage of disposable personal income was 4.2% in February, the Commerce Department said. It was 4.4% in January. The last time the saving rate exceeded 4.0% two straight months was August and September 1998, up 4.3% and 4.2%, respectively.

How is it possible to spend more, save more, all the while earning less? Taxes paid down and social benefits up...

Source: BEA


  1. There is nothing Keynesian here. It is due to better social benefit safety nets such as unemployment insurance and also due to lowering the taxes on weekly paychecks. Both of these are not part of Keynesian economics.

    Almost none of the Keynesian government stimulus fiscal spending has yet to take place.

    If anything, you are seeing the reasons that Keynesian economics is unnecessary in times of downturns. There are other quicker and much more effective solutions.

  2. A counter anecdote: the existence of future Keynesian spending is affecting spending in my household. I'll be unemployed in 6 weeks (likely). But my wife is in Biotech and she is likely to see steady work for the foreseeable future. And that increased work is coming directly from stimulus and indirectly from a restored NIH budget.

    Without the Keynseyian stimulus we would have cut back enormously: no private school for the kids, no summer camp for the kids, no vacation rental...