Signs of a Consumer Spending Bounce?

After spiking to 6%, savings rates for consumers have fallen and are now back to 3% as of August. We are still however off the lows of 1% savings rate. Are consumers back to their spending ways again? Or are these one off effects of government programs like "clunkers" and the $8000 credit for homebuyers?

While many skeptics will point to the latter scenario, and they may be correct (see the drop in annualized auto sales back to 9mil units from 14mil units in the heat of "clunkers"), who knows when the Fed and the government will take their foot off the stimulus pedal? They have all the incentives and the capabilities to print more moolah. Again, skeptics may laugh at the government's capability to take on more debt to subsidize the economic recovery, but the dethronement of the US dollar as reserve currency won't happen overnight, and global economies have limited options as to where to put their foreign reserves.

The fact is, the US won't turn into a producing/manufacturing economy overnight, while countries in Asia and the Middle East will continue to be producers for the long-term. The only way to balance things out is for them to invest in US securities... including debt. So it looks like the US government and the Fed will keep on rolling out programs to revive consumer spending as they have no choice, and it's not a matter of "if", but "when" the US consumer recovers.

Comments

[GreenMom:]

The consumer can't just print money, and won't just spend because the government offers "credits." Consumers live in the real world.

Jobs? Companies will not hire like they used to because now they have discovered that they can still make profits with a much smaller workforce. Witness Dow 10k. Revenues up, EPS up, all over the place.

What jobs? A small business owner will think twice before bringing on more employees even as business picks up because of possible mandated health insurance coverage, which will eat up his meager profit and then some.

The consumer would still be saving 6% or more if he could. However, now his savings are back to 3% as he dips into his savings to survive. With rising unemployment, this is the only explanation!

I believe that Winnebago sales are up not because of people taking vacations but because so many had to unload their homes that they bought motor homes for a roof over their head. Has anyone got data to support or refute this?

Oct 15 10:19 AM

[thiazole:]

These are savings RATES, not absolute savings. People were saving 6% of their income and that rate of savings dropped to 3%. Total savings didn't "drop" in August - it increased more slowly.

On Oct 15 10:19 AM GreenMom wrote:

> The consumer would still be saving 6% or more if he could. However,
> now his savings are back to 3% as he dips into his savings to survive.

Oct 15 04:11 PM

[thiazole:]

How about the fact that in many (if not most) markets, equivalent sized houses are cheaper than Winnebagos.


On Oct 15 10:19 AM GreenMom wrote:

> I believe that Winnebago sales are up not because of people taking
> vacations but because so many had to unload their homes that they
> bought motor homes for a roof over their head. Has anyone got data
> to support or refute this?

Oct 15 04:14 PM

[Karen Consumer:]

Yes, but if I live in a Winnebago and my job market dries up, I can drive my house to a better market, where as if I have a brick & morter home, I mail the keys in and live in my car. Better the Winnebago (much harder to repo as well).

Oct 15 07:10 PM

[thiazole:]

You could do the same with a $20,000 trailer home.


On Oct 15 07:10 PM Karen Consumer wrote:

> Yes, but if I live in a Winnebago and my job market dries up, I can
> drive my house to a better market, where as if I have a brick &
> morter home, I mail the keys in and live in my car. Better the Winnebago
> (much harder to repo as well).

Oct 16 11:44 AM