Here's a silver lining to that dark cloud some folks are calling the worst economic environment since the Great Depression: the savings rate is up. Nervous about the other shoe dropping, Americans are stashing away extra funds for a rainy day. In large part, cash collected from bonus payments, cost-of-living raises, or holiday gifts were saved rather than spent in January, lifting the personal savings rate to its highest since March 1995, at 5.0%. Just last year, the personal savings rate was hovering at an unimpressive 0.1%. From the 1950s through the early 1980s, however, the savings rate was closer to 10%. Viewed on an annual basis, the personal savings rate hit a new record of $545.5 billion.
Even while savings were on the rise, consumer spending edged up 0.4% during January. This was the second increase in the past eight months and the largest overall increase since November 2007. Adam York, a Wachovia economist, told MarketWatch "...we will take any good news on the economy these days." Indeed, the economic crisis may have people being more sensible, more conservative - even, dare we say, smarter?
Beth Gaston Moon works for WeSeed.com, "The stock market for the rest of us." The above comments are not intended as trading or investment advice.
Beth Gaston Moon works for WeSeed.com, "The stock market for the rest of us." The above comments are not intended as trading or investment advice.
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Reader Comments (Page 1 of 1)
3-02-2009 @ 4:35PM
TX CHL Instructor said...
A substantial amount of the savings is going the same way as it did in the 1930's, namely, into mattresses (at least figuratively). That's why we are seeing deflation in spite of trillion-dollar pork bills.
Deflation is self-feeding (positive feedback loop), which is one of the reasons it is so incredibly painful. Folks see prices dropping, so they wait to buy stuff, which causes prices to drop more...
Eventually, however, Obama's new printing presses will overwhelm that savings trend, and we will see hyperinflation.
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www.chl-tx.com
Last week, the US Congress passed the largest, most pork-laden spending bill in US history, and not one member of the US Congress actually read it before the vote. That bothers me. A lot.
3-02-2009 @ 9:47PM
Ynot said...
Unfortunately that savings is going to be ate up by increased taxes you will be paying. Also that extra $13 dollars you will get in your check will be taken off your witholding taxes. At year end you will get less if you get a return or pay more if you usually owe at the end of the year. Clinton pulled this crap and Obama has the same playbook.