Consumers still refusing to save

Associated Press

NEW YORK — Do you recall the kid in the fifth grade who always seemed to be looking out the window while the teacher was writing the assignment on the blackboard? That’s the American consumer today.

Businesses are re-examining their capital appropriations plans lest they overdo their spending, and local, state and federal governments are promising cuts. But it seems the consumer hasn’t read the assignment.

It’s been repeated enough. Federal Reserve Chairman Alan Greenspan has said it dozens of times over recent years: Slow down, watch your spending, try to save or else this economy is headed for trouble.

He’s succeeded to a degree, and now it appears the economy will achieve a soft — rather than a crash — landing. But little thanks to the consumer, who continues to spend with abandon, even borrowing to do so.

The Federal Reserve said last week that consumer credit rose by $13.4 billion in September, a figure that was translated into unexpectedly strong automotive and home sales, in extraordinary spending on travel and entertainment, and in the casual, everyday use of credit cards.

True, consumers’ incomes rose strongly in September, but apparently not sufficiently to convince them to use cash instead of credit, and still not enough to raise the savings rate above zero.

On the surface, at least, this seems to defy the concerns expressed in the most recent University of Michigan consumer survey, primarily that consumers are worried that incomes might fall and inflation might rise.

It also seems to ignore the precipitous decline in dotcom stocks, on which a good deal of consumer hopes depended. If the sudden loss of $500 billion or so in the value of dotcoms and their cousins doesn’t make an impression, what can?

In fairness, while consumers might not have learned their assignments very well, they aren’t totally at fault. Federal regulators are worried that banks have just as indiscreetly lowered their standards.

Consumer solicitations by credit card issuers during April, May and June reached 992 million, the highest quarterly number ever measured by BAIGglobal, a market research firm specializing in such studies.

Consumers, in fact, even showed unusual resistance to solicitations, but issuers still netted 4 million applications, and it can be assumed that a large number of nonrespondents already have at least one card.

Their resistance, however, hardly indicate that the courage of consumers has diminished.

The Michigan surveyors comment that in spite of stock market and other worries this year, consumers have merely tempered their optimism, rather than abandoned it.

The majority of consumers in the October survey, said Richard Curtin, director, "still expected the expansion to last at least another five years."

Copyright ©2000 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Talk to us

More in Local News

Marysville firefighters respond to a 12-year-old boy who fell down a well Tuesday May 30, 2023 in Marysville, Washington. (Photo provided by Marysville Fire District)
Marysville firefighters save boy who fell 20 feet into well

The 12-year-old child held himself up by grabbing on to a plastic pipe while firefighters worked to save him.

Highway 9 is set to be closed in both directions for a week as construction crews build a roundabout at the intersection with Vernon Road. (Washington State Department of Transportation)
Weeklong closure coming to Highway 9 section in Lake Stevens

Travelers should expect delays or find another way from Friday to Thursday between Highway 204 and Lundeen Parkway.

Students arriving off the bus get in line to score some waffles during a free pancake and waffle breakfast at Lowell Elementary School on Friday, May 26, 2023, in Everett, Washington. (Ryan Berry / The Herald)
800 free pancakes at Everett’s Lowell Elementary feed the masses

The annual breakfast was started to connect the community and the school, as well as to get people to interact.

Marysville Mayor Jon Nehring speaks at the groundbreaking event for the I-5/SR 529 Interchange project on Tuesday, May 23, 2023 in Marysville, Washington. (Olivia Vanni / The Herald)
$123M project starting on Highway 529 interchange, I-5 HOV lane

A reader wondered why the highway had a lane closure despite not seeing work done. Crews were waiting on the weather.

Justin Bell was convicted earlier this month of first-degree assault for a December 2017 shooting outside a Value Village in Everett. (Caleb Hutton / Herald file)
Court: Snohomish County jurors’ opaque masks didn’t taint verdict

During the pandemic, Justin Bell, 32, went on trial for a shooting. Bell claims his right to an impartial jury was violated.

Gary Fontes uprights a tree that fell over in front of The Fontes Manor — a miniature handmade bed and breakfast — on Friday, May 12, 2023, at his home near Silver Lake in Everett, Washington. (Ryan Berry / The Herald)
Everett’s mini-Frank Lloyd Wright builds neighborhood of extra tiny homes

A tiny lighthouse, a spooky mansion and more: Gary Fontes’ miniature world of architectural wonders is one-twelfth the size of real life.

Will Steffener
Inslee appoints Steffener as Superior Court judge

Attorney Will Steffener will replace Snohomish County Superior Court Judge Janice Ellis, who is retiring in June.

Logo for news use featuring the municipality of Mountlake Terrace in Snohomish County, Washington. 220118
Lawsuit: Defective inhaler led to death of Mountlake Terrace man

Pharmaceutical company Perrigo recalled inhalers in September 2020. Months earlier, Antonio Fritz Sr. picked one up at a pharmacy.

Steven Eggers listens during his resentencing at Snohomish County Courthouse in Everett, Washington on Wednesday, May 31, 2023. (Annie Barker / The Herald)
Life in prison reduced to 38 years for 1995 Skykomish River killing

Steven Eggers, now 46, was 19 when he murdered Blair Scott, 27. New court rulings granted him a second chance at freedom.

Most Read