Americans Made More, Spent More in January
The U.S. Commerce Department today released data on personal income and expenses for January.
Personal income rose 0.3% in the first month of 2014, driving a 0.4% increase in disposable income. Consumer expenses also rose 0.4%, in lockstep with disposable dollars.
This is mildly good news. Both disposable income and consumer spending are growing faster than their four-year monthly averages. Data from the St. Louis Federal Reserve Bank show inflation-adjusted disposable income gaining 0.15% in an average month, while adjusted consumer spending generally grows 0.2% a month.
But it's not all rainbows and unicorns, because the January numbers were boosted by some very unusual events.
A bitterly cold winter forced millions of Americans to pay more on heating bills, adding some artificial strength to the spending stats.
The income box also had several rare factors pulling on it, in every direction:
This was the first month for many of the Affordable Care Act, or Obamacare, provisions to take effect. That's a growth driver for personal income since health care benefits count under the "income" heading.
January is special because it's the month in which many corporations and the U.S. military execute annual pay raises.
On the other hand, federal Emergency Unemployment Compensation expired on Jan. 1, thus reducing income for many jobless consumers.
December's personal income data was also unusually strong thanks to lump-sum Social Security payouts, giving January a higher bar to clear.
Excluding all of these special events, personal income only increased in line with the 0.2% long-term average.
At the end of the day, Americans held on to 4.3% of disposable income in January, the same rate as December. These are the 540 billion consumer dollars that were not spent on anything, but are going into savings accounts, buried coffee cans, and long-term investments.
Investing your leftover cash in the stock market is far healthier than simply sticking your savings in a sock drawer. Sure, stocks can lose value from time to time, but the market bounces back stronger after every crash.
The Dow Jones Industrial Average has quadrupled in value over the last 20 years, including the 2001 dot-com crash and the 2008 mortgage meltdown. At the same time, inflation-adjusted disposable income only grew by 85%.
Investing a little bit every month will beat coffee cans and savings accounts in the long run. Are you in the market yet?
Want to profit on analysis like this? The key for your future is to turn business insights into portfolio gold through smart and steady investing ... starting right now. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. The Motley Fool is offering a new special report, an essential guide to investing, which includes access to top stocks to buy now. Click here to get your copy today -- it's absolutely free.
The article Americans Made More, Spent More in January originally appeared on Fool.com.Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.