Americans saw slightly fatter wallets in August, and then promptly spent that money. The latest figures from the Commerce Department show that personal income grew by 0.4 percent, an acceleration from July's 0.2 percent growth and in line with consensus estimates. The bounce in incomes holds even when inflation and taxes are taken into account. Real disposable personal income grew by 0.3 percent in August, an improvement from July's 0.2 percent and June's decline of 0.1 percent.
That extra income sent Americans to the store. Consumer spending also sped up last month, to 0.3 percent from July's 0.2 percent.
The fact that consumers have remained resilient despite factors that threaten to drag on spending is a positive sign, says one economist.
"On the whole, this should be viewed as a positive report," writes Thomas Feltmate, economist at TD Economics . "Despite the headwinds put in place by higher payroll taxes and ongoing government furloughs, consumer spending continues to show resilience."
Still, consumers didn't spend all of their extra wages. The personal saving rate grew slightly, from 4.5 to 4.6 percent. That uptick may signal that Americans are still wary of spending.
"It's really been hanging around that 4.5 percent range. And that's a range, when we look back, at least especially compared to the mid-aughts, that is well above what we had in 2005, 6, and 7, when people were spending like crazy," says Joel Naroff, president and chief economist at consulting firm Naroff Economic Advisors. In the years before the crisis, the personal saving rate hung in the 2 to 4 percent range.
That consumers are holding back on spending even when they get a few extra dollars shows that they are still cautious. In part, that's because they're not seeing strong enough wage growth to justify extra spending.
"You have a consumer-based economy. If wages and salaries don't go up, you're not going to have strong growth," says Naroff. "There's no other way around it."