Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like TRADE.com are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

For One Third of American's, Frugality is now the "New Normal"

Economics / Recession 2008 - 2010 Jul 22, 2009 - 11:34 AM GMT

By: Mike_Shedlock

Economics

Best Financial Markets Analysis ArticleA Gallop Poll of Americans’ future spending trends show One-Third Still Set on Spending Less.


Here are the results of the question: If spending more or less money, just your best guess, is the change in spending habits your new, normal pattern for years ahead or just a temporary change?


There is little variance between April and July. However, note that most of those expecting to spend more think it will be temporary, while most of those who will be spending less think it will be the "New Normal".

Given that tax hikes will hit the upper pay scales more and it is the middle to upper income ranges most devastated by the stock market and housing crashes, one might expect a significant falloff in spending in the middle and upper income groups. Such was not the case as those claiming to spend less are fairly uniform across all income groups as the following chart shows.

Multiplied across tens of millions of American households, even a small reduction in spending, perhaps coupled with a small increase in saving, could have a major effect on the consumer economy in the years ahead. And these data suggest that if one takes Americans at their word, there will be at least some shift in the nation's economy to a "new normal" of more restrained consumer economic activity for some time to come.

Spending Not Quantified

Wen it comes to spending, the poll does not quantify how much more or less. Nonetheless, it's significant that those willing to spend more are concentrated at the low end of the income scale ($30,000 and below).

Perhaps some low income workers expect a boost in the minimum wage to help. But if so, shouldn't it be permanent?

One in Four Americans Expect to Save More

The poll also showed that 25-27% expect to be saving more. Indeed the US Savings Rate Hits 6.9%, Highest In 15 Years.

In response to the above, I received many emails saying people were not saving, they were paying down bills.

The fact of the matter is: Paying down bills is saving. Similarly, putting money in the bank while racking up more debt is not savings.

For most wage earners, the savings rate is after-tax salary minus personal consumption expenditures (PCE).

By definition, the savings rate ignores interest income, capital gains, asset prices, etc.

Please see What's Behind The Soaring Savings Rate? for a more precise definition and further discussion of the savings rate.

Spending Patterns vs. Corporate Profits


Two-thirds of the economy is consumer spending and 50% of consumers claim they will be spending less while only 20% (concentrated at the low economic wage scales), think they will be spending more. Furthermore, most of those claiming to be spending more think it will be temporary, while most of those who think they will be spending less think it will be the "New Normal".

If it plays out that way, think corporate profits and the GDP are going to bounce strongly and stay up with those kind of numbers? If so, think again.

Target must be thinking again given they just canceled construction on a 185,000-square-foot SuperTarget store unless the developer agrees to rework the terms of the deal. See Moody's Commercial Real Estate Scorecard Accelerates To Downside for more details including grim hotels and industrial stats.

Consumer demand is not there and more importantly, it is not coming back. The implications are ominous for commercial real estate and the much hoped for recovery in jobs.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

Mike Shedlock Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules