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Economy Stable, Consumers Saving
Tuesday, August 6, 2013 8:00 AM

According to the U.S. Department of the Treasury, personal savings is still good. Consumers were saving at a rate of 5 percent in 2008 as the recession built momentum, and it reached a high of 6.1 percent at the recessionary peak in 2009.

Currently consumers are spending a little more, but not drilling themselves into a hole as in 2005. The savings rate during the second quarter of 2013 was 4.5 percent, up from the 4 percent during the first quarter. Consumption is slightly down, but on par with the last half of 2012, and certainly not contracting.

The highest savings has been in recent history was 6.6 percent in fourth quarter of 2012 when there was concern that the economy was faltering and consumer confidence in the economy and solutions wavered away from favorableness.

Personal income increased $45.4 billion, or 0.3 percent, and disposable personal income (DPI) increased $33.6 billion, or 0.3 percent, in June, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $59.4 billion, or 0.5 percent. The difference in consumption and income is made up by either reducing savings or taking out loans. Currently the latter is the case, consumers are cautiously buying, primarily automobiles.

In the rest of the economy residential construction is still strong, especially with multifamily units. Imports are significantly higher than exports, leading to trade imbalances and adding to the nation’s debt. With Europe still in recession and China reducing imports to fight significant inflation, the buyers of our exports are cutting back. This may lead to a net importer nation status for the foreseeable future.

Manufacturing productivity remains high despite the unemployment rate, as businesses are relying more on technology to create goods and services and less on human power. As a service related economy, the U.S. may need to significantly retrain the population in order to reduce unemployment and help employers find qualified candidates. Help wanted ad volumes and open jobs are nearly double where they were in 2005 when the economy was strong, but the skills demanded today do not match the workforce.

(Source: U.S. Treasury Department, 2 August 2013)