This morning’s University of Michigan Survey of Consumers showed consumer confidence is the highest it’s been in three years. No one denies that America is a nation of spenders, but not everyone knows that the personal savings rate in this country has been in the red for more than 20 months now – and the last time it was negative was during the Great Depression. But is our spend-a-holic syndrome good – or bad – for our economy? Richard Yamarone of Argus Research and Joel Naroff of Commerce Bank were on “Morning Call” to give their takes on the pros and cons of American spending.
Last year’s report from the U.S. Bureau of Labor Statistics on consumer expenditures in 2004 showed consumer spending was up over 6% from the previous year (although the survey was changed in '04 so the numbers are not strictly comparable). The most significant increases in specific expenditures were food, housing, apparel and healthcare. And a quick note on personal savings in this country: as a percentage of disposable personal income, it was 8% in 1991. That number was down to –1% in 2005.
Yamarone says there’s no reason to worry – that, at least from a national income accounting standpoint, the more we spend the better. “We never really were a nation of savers,” Yamarone says. The consumer is what’s carrying the bull run on Wall Street; their spending is creating the stimulus for this market.