Americans are finally saving more, just in time to threaten recovery
Nevertheless, learning to become a nation of savers is good medicine for the millions of Americans addicted to $4 coffee, gourmet kitchen appliances and fancy electronics, says one financial expert.
"Although it's painful in the short term, the American economy will be much better served in the long run if the American consumer had a little bit more money in savings," said Greg McBride, senior financial analyst at Bankrate.com.
Americans saved 4.6 percent of their incomes in June, according to a report released earlier this month by the Commerce Department. While that may seem small, it's considerably better than the zero percent seen just a few years ago, just before the housing bubble burst.
McBride said, however, he sees no evidence that the current trend of increased saving will continue and will fall well short of the rate seen some 30 years ago when Americans routinely squirreled away 10 percent of their incomes.
"I think you're going to see it stabilize at current levels," he said.
And while the Commerce Department report suggests that more people are saving, McBride said that those already inclined to save are likely the ones driving the increase. Those who have never saved aren't likely to join-in "cold turkey" and suddenly start stuffing the piggy bank.
Despite the rise in the national savings rate, which has been much publicized, most Americans haven't changed their savings habits, a recent Bankrate.com poll showed. Just 17 percent have increased savings, while 44 percent are saving about the same amount as before. Thirty-six percent are saving less. Further, the poll showed that among employed Americans, only 35 percent have adequate savings to weather a job loss lasting more than six months.
The survey didn't reveal the reasons behind why those who were saving more were doing just that. McBride suggests the reasons are several, including nervousness about the job market. Some 14.5 million Americans don't have jobs, and there are 10 times as many who worry that they might be next to join the unemployment line, he said.
Other influencing factors include diminished values of homes and retirement plans. Many Americans are and certainly feel less wealthy than they were just a couple of years ago.
It's not only consumers who are saving more but businesses as well. Companies, especially those involved in technology and health care, are stuffing money under the corporate mattress, building up reserves to ride out the recession in anticipation of a recovery when revenues will hopefully increase.
The combination of thrift on the part of both consumers and businesses furthers worry that recovery will likely be slow.
But it's not all doom and gloom.
"If there's a glimmer of hope here, it's that businesses are starting to loosen up on the purse strings a little bit," McBride said. "The consumer is just not quite there yet."