Long Term Perspective

Typically, consumers increase spending in direct proportion to gains in disposable income. Over the period of 1998 through mid-2006, spending outpaced income, as consumers felt wealthier from stock market gains and housing appreciation. Since mid-2006, income growth on average has slightly outpace spending as consumers have cut back on expenditure growth.

Short Term Perspective

Consumer spending expanded at a 2.8 percent rate in the third quarter – up from the 1.4 percent pace the prior quarter.  Strength in the latest quarter was led by the durables component with a 4.5 percent annualized boost but nondurables and services also were strong with increases of 2.2 percent and 2.8 percent, respectively. Disposable personal income rebounded in the third quarter with a 4.5 percent jump, following a 0.8 percent annualized dip in the second quarter.