Personal Income, Savings Up

Even as the 2012 holiday shopping season was ending on Monday, at least one estimate said that consumers didn't spend that much more this year than last year.

The Bureau of Economic Analysis reported on Friday that U.S. personal income increased $85.8 billion, or 0.6 percent, in November compared with October, while disposable personal income—net after taxes—increased $74.7 billion, or also 0.6 percent. Consumer spending (personal consumption expenditures) mirrored that increase, rising $41.3 billion, or 0.4 percent month-over-month in November.

Both of the totals are notable increases over October, when both disposable personal income and consumer spending were up only 0.1 percent. The BEA’s price index for personal consumption expenditures decreased 0.2 percent in November, compared to an increase of 0.1 percent in October. Exclude food and energy from that and the increase was less than 0.1 percent in November, which is another indication that inflation is essentially flat, despite energy price gyrations.

Americans were also saving more in November, either as a mark of prudence or nervousness or both. Personal saving—which the BEA calculates as disposable personal income minus personal outlays–was $436.7 billion in November, up from with $404.6 billion in October. The personal saving rate, which is personal savings as a percentage of disposable personal income, was 3.6 percent in November, compared with 3.4 percent in October.

Holiday spending might disappoint

Even as the 2012 holiday shopping season was ending on Monday, at least one estimate said that consumers didn’t spend that much more this year than last year. According to the MasterCard’s SpendingPulse unit, for the eight weeks before Dec. 24 (beginning Oct. 28), Americans spent only 0.7 percent more than during the same period in 2011, though the company didn’t provide a dollar figure.

That’s better than a drop in sales, which last happened in the early dark days of the Great Recession in late 2008. In 2009 and ’10, holiday season sales were up strongly, and last year gained about 2 percent year-over-year, according to SpendingPulse, which monitors the MasterCard payment network, and makes estimates of payments made in other forms to arrive an a total consumer spending estimate.

If SpendingPulse is correct, the 2012 lackluster holiday spending came hand-in-hand with a drop in consumer sentiment. The latest Thomson Reuters/University of Michigan consumer sentiment index, which was released on Friday, dropped to 72.9 from 82.7 in November. It was the weakest sentiment report since July.

Fiscal cliff vexes investors

Congress left town on Friday with the fiscal cliff infamously unresolved. The legislative branch may or may not come back this week to chew on the matter some more, but will definitely be back after a new, slightly changed Congress is sworn in on Jan 3. The cliff might account for consumer skittishness, and seems to be upsetting investors as well.

Wall Street was open for trading on Monday, but closed early ahead of the Christmas holiday on Tuesday. On the shortened trading day, the Dow Jones Industrial Average managed to lose 51.76 points, or 0.39 percent. The S&P 500 was down 0.24 percent and the Nasdaq declined 0.28 percent.

On Friday, all the indexes were down even more, probably reacting to the continuing crisis of the fiscal cliff. In much heavier trading than on Christmas Eve, the Dow Jones industrial Average lost 120.88 points, or 0.9 percent, while the S&P 500 was also down 0.9 percent and the Nasdaq declined 1 percent.