CINCINNATI — Consumers are spending more money, but are cutting back on saving, according to new federal data.
Both consumer spending and personal income increased, according to the latest report from the Bureau of Economic Analysis. However, spending growth outpaced income growth.
“So, where does that increase spending come from?” said Dr. Michael Jones, an assistant professor of economics at the University of Cincinnati. “It has to come from savings.”
The personal saving rate (or percentage of disposable personal income) was at its lowest point since fall 2022. Track historical data here.
“Inflation is still a problem for the economy,” Jones said. “Consumers are still struggling to make some of the payments that they have.”
Jones recommends consumers save at least 10% of the money they bring home.
“Part of it is because you can't predict what the economy is going to look like in terms of employment,” he said.
“It's hard considering I have four babies,” said Cincinnati resident Caitlyn Hearn.
Despite this, Hearn tries to put away half her income into savings. She drives for DoorDash. Typically, her paycheck goes toward food, diapers and bills.
“My daughter's birthday just passed and little occasions like that make times a little harder,” she said.
Jones said the federal government is in a difficult spot.
“The Federal Reserve needs to keep interest rates high in order to bring inflation down,” said Jones. “But obviously, as interest rates stay high, it makes it more difficult for the consumer and businesses.”
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