The latest report from The Commerce Department shows that American spending rose 0.2 percent last month, however, adjusted for inflation, spending actually remained unchanged. Meanwhile, incomes fell 0.1 percent. The last time that occurred was October of 2009, when incomes fell 0.1 percent as well. Consumer spending accounts for 70 percent of economic activity, and therefore, a decline in positive income growth could potentially stall the economy.
Additionally, Americans allocated less of their income towards personal savings. The savings rate also fell to its lowest level since late 2009. This can also directly be attributed to inflation, and the overall rise in food and fuel costs. Undoubtedly, many Americans have also dipped into their savings to adequatly afford to purchase all of their needs.
And while some pressures are becoming a little less severe (such as a recent decline in fuel prices,) and are helping many Americans to breathe an ever slight sigh of relief — it is just a stopgap measure. In truth, any hope of an economic recovery will continue to remain bleak until we experience major job growth. The creation of new jobs will restore job security and will also boost consumer spending.