DISQUS

Market Folly: Consumer Savings Rate to Rise

  • dustinjruybal · 6 months ago
    On average, consumers from 1950 to 1985 saved 9% of their disposable income. That saving rate then steadily declined, to around zero earlier this year (see chart). At the same time, consumer and mortgage debts rose to 127% of disposable income, from 77% in 1990. Those forces have now reversed. The stockmarket has fallen to the levels of a decade ago. House values have fallen 18% since their peak in 2006. Banks thrift savings plan and other lenders have tightened lending standards on all types of consumer loans. As a consequence, consumer spending fell at a 3.1% annual rate in the third quarter (in part because tax rebates boosted spending in the second)Read more: "Consumer Savings Rate to Rise ~ market folly" -
  • marketfolly · 6 months ago
    Yup, it is a vicious cycle indeed. But a necessary step in the right direction to get things back to normal. Consumer balance sheets need to be in better shape to go forwards.