Glum Consumers Focus on Cutting Debt, Savings
Americans, unnerved by a worsening job market and sky-high oil prices, plan to pay off debt and boost savings in preparation for expected further economic turmoil, according to a survey from Reuters and the University of Michigan.
Half of U.S. consumers polled said they plan to speed up reducing their debt and a third said they plan to save more in the year ahead, according to the survey, which will be released next week.
"Most of the planned declines in debt and increases in savings are intended as a precautionary measure in the face of a deepening economic downturn," Richard Curtin, director of Reuters/University of Michigan Surveys of Consumers, said in a statement on Friday ahead of Tuesday's release of the poll.
The Reuters/University of Michigan's widely followed U.S. consumer sentiment index has fallen sharply this year, as the economy slows and oil prices hit record highs.
A week ago, it said the index turned up slightly in early July after hitting a 28-year low in June.
There have been nascent signs of the intended debt and saving moves by gloomy consumers.
The government's measure of aggregate U.S. savings jumped to 5.0 percent in May, the biggest since March 1995, while the Federal Reserve's gauge of household indebtedness versus income slipped to 14.13 percent in the first quarter, the lowest in two years.
While much of the recent debt reduction was voluntary, Curtin said a sizable portion stemmed from difficulties in obtaining loans or a growing perception that banks are reluctant to extend credit.
Moreover, the higher saving goal could be thwarted if energy and food prices continue to rise and companies shed more jobs as business conditions deteriorate, according to Curtin.
For the broader economy, debt reduction and savings increases by consumers, who account for more than two-thirds of the U.S. economy, will coincide with a deepening economic downturn in the second half of 2008 and early 2009, he said.
The survey results came from interviews with 1,292 people from May to early July.