Personal incomes rose in November at the fastest pace in six months, while spending posted a second straight increase. But economists caution that the gains remain too weak to sustain a strong economic recovery.
The Commerce Department said Wednesday that personal incomes rose 0.4 percent in November, helped by a $16.1 billion increase in wages and salaries. It reflected the improved employment picture last month.
The rise in incomes helped bolster spending, which rose 0.5 percent. Both the income and spending gains were slightly less than economists had expected.
After taking inflation into account, after-tax incomes are rising at an annual rate of 1.2 percent. Economists say a true economic recovery will require higher levels of income and spending. This is especially true as households are using some income to shrink debt loads and rebuild savings, rather than spend.
“Annualized income growth of a little over 1 percent will not be enough to drive a significant recovery in consumption at the same time that debt needs to be paid down,” said Paul Dales, U.S. economist at Capital Economics.
Consumer spending is closely watched because it accounts for roughly 70 percent of economic activity.
The rise in incomes and comparable rise in spending left the savings rate unchanged in November at 4.7 percent of after-tax incomes.