Personal income and consumption

Consumer spending in the U.S. rose more than forecast in January. The 0.4 percent rise in spending followed a revised 0.3 percent gain in December, the Commerce Department published today. The Federal Reserve's preferred measure of inflation climbed 0.3 percent, the most in four months. Anyway, some parts of economic reports are really worrisome. In fact, there is no any consumer consumption in data because their growth reflects a jump in prices with eroding buying power. Lets have a look at the graph representing Real Personal Consumption which takes into account inflation and shows the consumption of the economy.



What is a driving power of the consumer consumption? The answer is easy - personal incomes, of course! If folks will earn more, they will spend more. American consumers do not save money. They spend as much as they can and will even borrow to spend more than they can afford And now, please have a look at the graph of Real Personal Income and you will get a real picture of what is happening in  the economy right now.