Americans are saving more and spending about the same as before; this news has economists worried about the potential for a recovery:
The personal saving rate, which measures savings as a percentage of disposable income, jumped to 4.4% in June from 4% a month earlier and a recent low of 3.2% in November, the government said Tuesday, as consumers squirreled away cash amid the weak economy.Spending on everything from vacations to clothes was largely flat in June. Spending fell less than 0.1%, after easing 0.1% in May, even though Americans’ income after taxes rose 0.4%, the most since March. Consumer spending is the biggest single driver of the U.S. economy, accounting for roughly two-thirds of demand.
A word to the wise: don’t let the economists talk you into doing something stupid. Economists worry that if Americans don’t consume, the economy won’t do well. That may be true in the short-term, but if Americans don’t save more than we’ve been accustomed to in the past, we will be in a lot of trouble in the medium to long-term.Smart Americans understand that many of our government entitlement programs are not as strong as politicians tell us. And we’ve seen stock markets crash and housing bubbles burst. As a result of all this hard-won experience, Americans are starting to save more money. That’s the best possible song for the long-term health of our economy.Via Meadia‘s financial advice: Spend less, save more, and give more away to the needy. Let the economists worry about the bigger numbers.