I guess it’s really no surprise that consumers have spent less money in the previous quarter as jobs have been lost and credit has tightened. Economists are reporting that this consumer tightening on the pocket books will cause the current recession to last longer than previously predicted. What’s good for the consumer is bad for the credit card companies and the economy. Not even zero percent financing and the lowest home interest rates can get Americans interested in borrowing. What will it take? Maybe seeing our home values increase, bonuses increase, and neighbors to start talking about other things besides the poor stock market performance.
According to the AP article, the Federal Reserve reported that consumers decreased spending by almost $8 billion dollars in November, which was the largest decline in 65 years. Yikes!
If you have been a frugal saver, shopper and overall consumer you now have more in common with fellow Americans. Interesting if this trend continues and more people start saving money and creating an emergency account or just saving in general. Maybe you are going to be a trend setter and shed your frugal lifestyle and start spending now that you might find some great deals to be had. Any purchases you see as tempting right now?
{ 3 comments… read them below or add one }
This is a prime example of the disconnect that has come in our economy: What is good for the individual is not good for the whole, and vice versa. Our economy runs on debt-fueled consumer spending, so when consumers are beholden to the chains of debt and interest, the economy gains. That is our current problem. Debt-based consumer spending cannot continue unsustained, so instead of changing our economic model, our leaders are trying desperately to keep things as status quo as possible.
Ah yes, the ‘Paradox of Thrift’. Our economy certainly would be stimulated more with continued cheap credit and enormous amounts of deficit spending, but in the long-run it’s completely unsustainable.
In the short-run, a shift to a more thrifty, frugal economy will be painful for many. Over time though, it’s the only way to achieve financial and economic prosperity.
@ Miranda
It makes me wonder if the “hot” gift for Christmas 2009 will be piggy banks. Probably not, but I hope more people will start to rethink saving money.
@ Blake
A frugal economy will hurt many, especially those families that require two incomes to survive. I guess the question will be, how long will the pain last?