We’ve learned some lessons over the last few years about money. Some good, some bad: we’ve learned that a lot of debt isn’t sustainable (whoops) but hopefully we’ve also learned some better money managing tips. Our new and improved financial antennas should help us keep our finances on a channel we can live with (and one that hopefully also shows Glee and American Idol). We can still spend money but we should keep spending within our means (“spending in moderation”). Shockingly, binge spending is just as bad for you as binge eating.
Keeping our antennas finely tuned into how much money we have (and what our expenses are) can help. Data released today shows nationally our disposable income (spending money) increased in May by $29.2 billion (or 0.2% over April). Of course, then comes the less appealing: “real” disposable income (spending money after adjusting for price increases) increased by 0.1% - not great, but better than the 0.1% decrease in real disposable income in April. Overall, however, as a nation our real disposable income has seen pretty negligible gains over the last year. At least it isn’t declining!
Our personal spending (on all things not just retail), which is an important ingredient in keeping the economy alive and well, flat lined in May. In May, our personal spending (“personal consumption expenditures”) increased by $4.6 billion (or 0.0%) after increasing by $28.8 billion in April. The flat spending in May isn’t all bad – the slower spending was likely due to the (albeit slight but still welcome) drop in gas prices. However, there is some not-so-good data too: after adjusting for prices, “real” spending declined in April and May, the first months to have real declines since January 2010.
It’s not surprising that we (people, businesses) are being more careful about spending – perhaps we’ve learned our lesson on money management! Can’t spend what we don’t have, very true. Next we can sell our money managing secrets in a “Money for Dummies” book for those young on money handling experience in other countries (Ooo, Exports! Bonus.). That’s one way to give our economy some lemonade from the lemons. Let’s try to keep the sweet and sours in life to stuff beyond our control (and Chinese food).
(Bureau of Economic Analysis)