What rise in consumer spending means

Shoppers carry their purchases along the Magnificent Mile shopping district in Chicago, Ill.

TEXT OF STORY

Kai Ryssdal: Now here's an interesting confluence of economic events. We learned this morning American factory production was up last month. They're churning out more things for us to buy, and we're obliging. The Commerce Department reports consumers stepped up their spending in March. That's makes six months in a row that increase has happened.

But hold on just a second. Because even though we're spending more, we aren't bringing in any more money. Incomes have barely budged. With unemployment still at nearly 10 percent, you can guess where the spending money is coming from. Our savings rate is lowest it's been in a year-and-a-half as Jill Barshay reports.


JILL BARSHAY: During the worst of the recession, Americans were so worried, they practically stopped shopping.

PHILLIP Swagel: People finally realize the world hasn't ended, and they're starting to spend.

That's Phillip Swagel. He was a senior economist in the Bush administration. Now he's at Georgetown University's school of business.

Swagel: This is a bit of a bounce back. I don't think we're going to have a gangbuster, consumer-driven, let's all get new cars and jack up credit cards. I don't think we're going to see that going forward.

But there is a lot of pent-up demand after months of frugality.

Scott Hoyt is a consumer economist at Moody's Economy.com. He says families are returning to old routines, like going to restaurants and buying clothes.

SCOTT Hoyt: The fluff may not be back in the budget, but at least the muscle's back there.

But where's that muscle coming from? Incomes have barely gone up. Hoyt says all that scrimping and saving over the past year has helped. Consumers have whittled down their debts and don't have such high credit card bills each month.

Hoyt: And that frees up money that can be used to purchase goods and services.

We Americans are not going further into debt. But we're once again saving less. And that has economists worried about our long-term future.

In New York, I'm Jill Barshay for Marketplace.

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