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Featured Advisor

Kim Butler

Partners for Prosperity, Inc.

City:Mt. Enterprise

State: TX

I have 20+ years of handling alternative investments in cash, growth and income for clients nationwide.  I strive to help my clients with all things financial in every way possible over the phone and the web.  I own an alpaca farm which I enjoy working during my downtime.  I also enjoy gardening, writing and reading books.  I also train other advisors on Prosperity Economics.

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Consumer Spending Trends Hold Steady, Income Dives

Personal income took the biggest monthly dive in 20 years, while spending rose slightly. Learn more about the latest consumer spending trends.

| BY Adriana Reyneri

Personal income fell 3.6 percent in the month of January, the largest monthly decrease in 20 years, the Commerce Department reported today. Disposable personal income – income after taxes - fell even further, by 4 percent, for the largest monthly decline on record.

The record income drop is the result of atypical events, according to the Bureau of Economic Analysis. Income was boosted in the month of December by accelerated dividend payments, and bonuses made in anticipation of tax increases in 2013. In January, payroll taxes reduced workers’ take-home pay. Excluding these unusual factors, disposable income was up 0.3 percent in January, according to the BEA.

Declining income poses the biggest obstacle to retirement savings.

January’s personal saving rate of 2.4 percent was the smallest since November of 2007, when Americans saved at a rate of 2.3 percent. Despite the loss of income, consumer spending trends held relatively steady with expenditures inching up 0.1 percent for the second month in a row.

Learn more about the lingering impact of the Recession on the ability to save and America Saves, a national effort to help improve savings habits and build personal wealth.

For all of 2012, personal income rose 3.5 percent, the smallest gain since 2009 when income fell 4.8 percent. Last year, disposal personal income rose 3.3 percent, the smallest rise since 2009 when disposable income fell 2.7 percent. The saving rate of 3.9 percent was the smallest since 2007 when the rate was 2.4 percent.

A breakdown of consumer spending trends shows that purchases of durable goods rose 0.8 percent in January, while purchases of non-durable goods and services rose 0.3 percent.