Warning signs in consumer credit data
The personal savings rate – the percentage of disposable income Americans set aside for retirement or savings – fell to a 12-year low of 2.4% in December. Two years earlier, the savings rate was 5% and in December 2012 it stood at 11%, according to data from the Federal Reserve Bank of St. Louis.
This decline in personal savings can be interpreted in several ways. On the one hand, this suggests that a significant number of households tap into savings to maintain spending levels, and it can be a difficult cycle to break when wages slowly rise and housing costs continue to rise. Moreover, it means that many households simply do not have enough money in their bank accounts to meet a sudden and unforeseen expense.
Then again, the drop could be the result of more consumers using their savings to buy homes, cars or other big ticket items, and all of this is a sign of growing confidence in the U.S. economy, according to Dr. Dan Geller, of San Francisco. based economist. Geller uses a metric called the “Money Anxiety Index” to measure consumer confidence, and he said on Friday that even after the crazy week on Wall Street, the index is at its lowest level since before the Great Recession. The February index stood at 51.4%. The 50-year average is 70.7%, and at the height of the recession it peaked at 100.4%, Geller said.
“Increased financial confidence … has fostered a condition where individuals are more confident to reduce the amount they save, or even use part of their existing savings, to help finance their consumption,” Geller wrote in a published report. Friday. “As long as economic fundamentals such as jobs, inflation and personal income remain stable, the level of monetary anxiety will remain low and people will continue to spend money despite this temporary volatility in the stock market. “