Labor Department released data on Personal Savings, Income, and Spending for July…

Aug. 30, 2010 - PRLog -- Andover, Massachusetts August 30th, 2010 –  The Labor Department has released a variety of data over the last few days detailing changes in consumer spending, saving and income in July. While there has been much talk of a double dip recession the data does not back up this fear. The data signals that while consumers continue to be wary of the general health of the economy, their rise in spending and drop in savings indicate they expect a complete recovery to take place.

Consumer spending rose by over 44 billion dollars in July compared to June, a rise of .4%. This is in contrast to a .1% reduction in consumer spending in June. This newest rise is a welcome boost for the economy but is not big enough to fully conclude that consumers are back to spending their hard earned cash. A big driver of this rise was a boost in auto sales in July while factories that typically are shut down for the summer remained open. An up tick in car purchases is a good indicator that consumers are less worried about their financial situation. Americans are starting to trust their finances again and are not as scared of becoming unemployed in the short term as they were just a short time ago when auto sales were at historic lows. If they were still anxious over their employment they would not be investing such a significant part of their income on a depreciating asset such as a vehicle. All of this has been done without any government incentive program so look for this to be a leading indicator of better times to come.

Personal income rose as well in July by over 30 billion dollars, a jump of .2%. This was much needed relief for Americans as income actually dropped in June by .1%. Continued increases in personal income are a good indicator that the economy is headed in the right direction so keep an eye on this statistic moving forward. And finally, personal savings dropped in July compared to June, a good short term trend but a troubling long term trend if it lasts. Personal savings as a percentage of disposable income dropped in July to 5.9% compared to 6.2% in June. While this means consumers are once again spending more and worrying less about their debt, it is important that this rate not reach the lows which we experienced before the collapse of 2008. We all know personal spending is the driving force behind the US economy, but it also left millions of households vulnerable to long term unemployment, medical emergencies, and other catastrophic family events. This is why so many people were left with nothing once the housing market tanked and unemployment sky rocketed in late 2008 and most of 2009. Keep in mind that July’s rate is still historically high so it is not time to worry yet, but if we see a return to a near 0% personal savings rate we will know that Americans did not learn from the Great Recession and are just repeating the personal finance mistakes that led up to the crash of 2008.

Preferred Financial Services is a debt reduction firm certified by the CFC (Center for Financial Certifications) and accredited by U.S.O.B.A. (United States Organizations for Bankruptcy Alternatives). Headquartered in Andover, Massachusetts, Preferred Financial Services has been a leader in the debt reduction industry since 2003. Preferred Financial Services has acquired some of the best experience in the industry over the past 7 years. In 2009 alone Preferred Financial Services reduced over $16.5 million worth of consumer debt for just $6.4 million, for a savings of about 60%- and over 2,900 accounts were settled on behalf of their clients.


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