cawacko
Well-known member
Consumer debt can only rise so high and the Fed can only keep interests so low for so long. There will be a time or reckoning.
Consumers Strain to Prop Up Recovery
Families are taking on more debt and saving less.
American consumers are spending more money on goods. That’s making people on Wall Street happy because such purchases account for about 70 percent of the U.S. economy.
But before anyone gets too enthusiastic about the buying spree, it's becoming increasingly clear that consumers are running out of steam to carry the load of U.S. economic growth.
On Tuesday, the Commerce Department reported that U.S. consumers boosted their July retail spending by the most this year. Analysts cheered, with some seeing less chance of a recession. Yet after a closer look, it appears that consumers are straining their finances to buy more makeup, baseball bats, couches and home-improvement supplies.
For one, they're packing on more debt. Households increased their borrowing over the past year at the fastest pace of the economic expansion, according to data published Tuesday by the Federal Reserve Bank of New York. They now have the greatest amount of debt on record, at $12.8 trillion, a $552 billion increase from a year ago.
Not only that, but families are also dipping more deeply into their cash reserves, with the personal saving rate falling to 3.8 percent in June, approaching the lowest level since 2008.
These savings rates are "historically relatively low," Lara Rhame, senior economist in fund strategy at FS Investments, said in a Bloomberg Radio interview on Tuesday. "You have to think about where you're going to get the money to spend. And it's either going to come from wages and income or it's going to come from your savings."
What's becoming increasingly clear is that the average U.S. household is in an increasingly difficult spot. Working Americans are receiving paltry raises. They're maxing out their credit cards and borrowing money to buy cars. And their fixed costs are rising, mainly because of more expensive health care and housing.
Strains are beginning to show. Credit card delinquencies ticked up notably in the second quarter, and plenty has been written about the poor performance of auto loans to less creditworthy borrowers. Some lenders have tightened standards in response.
This doesn't mean the U.S. is heading toward another crisis, or even an imminent recession. But it suggests that the consumer-led recovery needs something more to keep it going. Without something external to spur true wage growth, this low-growth environment will continue, leaving consumers burdened by debt and missing out on the relief of an accelerating expansion.
https://www.bloomberg.com/news/arti...shocked-if-consumers-run-out-of-spending-cash
Consumers Strain to Prop Up Recovery
Families are taking on more debt and saving less.
American consumers are spending more money on goods. That’s making people on Wall Street happy because such purchases account for about 70 percent of the U.S. economy.
But before anyone gets too enthusiastic about the buying spree, it's becoming increasingly clear that consumers are running out of steam to carry the load of U.S. economic growth.
On Tuesday, the Commerce Department reported that U.S. consumers boosted their July retail spending by the most this year. Analysts cheered, with some seeing less chance of a recession. Yet after a closer look, it appears that consumers are straining their finances to buy more makeup, baseball bats, couches and home-improvement supplies.
For one, they're packing on more debt. Households increased their borrowing over the past year at the fastest pace of the economic expansion, according to data published Tuesday by the Federal Reserve Bank of New York. They now have the greatest amount of debt on record, at $12.8 trillion, a $552 billion increase from a year ago.
Not only that, but families are also dipping more deeply into their cash reserves, with the personal saving rate falling to 3.8 percent in June, approaching the lowest level since 2008.
These savings rates are "historically relatively low," Lara Rhame, senior economist in fund strategy at FS Investments, said in a Bloomberg Radio interview on Tuesday. "You have to think about where you're going to get the money to spend. And it's either going to come from wages and income or it's going to come from your savings."
What's becoming increasingly clear is that the average U.S. household is in an increasingly difficult spot. Working Americans are receiving paltry raises. They're maxing out their credit cards and borrowing money to buy cars. And their fixed costs are rising, mainly because of more expensive health care and housing.
Strains are beginning to show. Credit card delinquencies ticked up notably in the second quarter, and plenty has been written about the poor performance of auto loans to less creditworthy borrowers. Some lenders have tightened standards in response.
This doesn't mean the U.S. is heading toward another crisis, or even an imminent recession. But it suggests that the consumer-led recovery needs something more to keep it going. Without something external to spur true wage growth, this low-growth environment will continue, leaving consumers burdened by debt and missing out on the relief of an accelerating expansion.
https://www.bloomberg.com/news/arti...shocked-if-consumers-run-out-of-spending-cash