Savings Rate

Thesis:The savings rate has risen to the highest peak in the last two years, and it’s either because the harsh winter dropped consumer spending or Americans are becoming more fiscally responsible.

 

One of the main reasons our economy collapsed in 2008/2009 was because of consumer behavior. People were spending like there was no tomorrow, but now in 2015 people are starting to spend like there will be a future. The savings rate has risen to the highest peak in the last two years, and it’s either because the harsh winter dropped consumer spending or Americans are becoming more fiscally responsible.

The personal savings rate is at 5.8% in February. “The rate measures the percentage of disposable income Americans don’t spend. In absolute dollar terms, the figure was a seasonally adjusted $768.6 billion, also the highest level since December 2012”(WSJ). This spike is an effect of cheaper gasoline and rising income. According to the Bureau of Economic Analysis “Wages and salaries increased $23.9 billion in February”(BEA). Even though wages are rising, people have not seen a big enough increase to make them feel like they are richer. Therefore, people could just be spending less because of the harsh winter or people are still scarred from the last recession.

Erica Curtis, a professor from Loyola University, agree with my agreement and stated “”In my professional experience, one of the underlying reasons for chronic saving is underlying negative thoughts, such as ‘I don’t deserve to have things,’ or feelings such as, ‘I’m anxious because we don’t have enough,’ even if they are financially secure,” (USA). These negative thoughts are derived from people experiences in the last ten years which include the recession. Even if people are starting to see increases in pay they understand that the economy can be change dramatically and need a financial security blanket. With 2014 being such a good year for America financial it should have provided to appropriate amount of time for people to collect their security blanket.

 

The second reason for the savings rate to be increasing is because people just are not spending money. One reason for this is because people were locked inside their homes all winter. “The government reported Monday that personal consumption expenditures — aka consumer spending — rose just 0.1% in February. That follows two months of declines of 0.2%” (CNN). However, now that the snow is starting to melt people will start to spend more. If they don’t spend more then it’s a clear sign that maybe Americans are becoming more fiscally responsible.

 

Of course an increase in saving is great for the long term, but we need people to spend money too to keep our economy moving in the short run. With spring around the corner its estimated to see a shift upward in spending. If this is true then the increase in saving it due to winter effects. If people continue to save more despite their increase in wage then people are becoming more fiscally responsible.

 

 

 

 

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