The stock market was down today amid worries that Americans are saving too much money (see the Associated Press story below).
It wasn’t more than a year ago the opposite was true – Americans weren’t saving enough money.
While the stock market may not be happy, I think this was long overdue. I’m wondering if this is a fundamental shift, where Americans will generally do a better job saving money in the coming months or years. I’ve heard from many people resolving to save money and eliminate debt, and the numbers seem to say Americans are serious. What do you think? Will Americans keep this up?
By MADLEN READ
^AP Business Writer
NEW YORK (AP) — Consumers are saving more than they’re spending, and that has investors worried.
Stocks capped a choppy week of trading with a mixed finish Friday after the Commerce Department reported that personal spending, incomes and savings all rose in May. What troubled investors was that the savings rate soared to 6.9 percent, a 15-year high, while spending rose by a modest 0.3 percent.
The trend suggests consumers are being very careful with their money. That’s good for the individual, but not great in the short term for the overall economy, which relies heavily on consumer spending for growth.
Phil Orlando, chief equity market strategist at Federated Investors, said he expects the savings rate to eventually hit 10 percent before it eases. The savings rate had been 5.6 percent in April, and annual savings rates were below 1 percent from 2005 through 2007.
“If people ramp up savings that aggressively, that is going to result in less GDP recovery than ordinarily would be the case,” Orlando said.
Gross domestic product dropped at an annual rate of 5.5 percent in the first quarter, the government reported earlier this week. As the first half of 2009 ends, investors are growing more anxious about whether the economy can bounce back later this year.
A great study this however, lets face it budgeting is one of those topics we’d rather avoid, but in company, it’s an absolute necessity. To prepare a reasoned and thoughtful budget, an accountant or must start by means of a common-based vital analysis of the a large amount modern actual performance and position of the corporation by the managers who are responsible for the results. Then the managers influence on explicit and concrete goals for the coming year. It demands a fair amount of management time and energy. Budgets must be worth this time and effort. It’s one of the solution components of a manager’s job.
We should be rewarding America for saving and being smarter about how they spend their hard-earned dollars. The US needs to figure out another way to make a living instead of counting on 70% of it from consumer spending.