Influx

From this week’s New Yorker.

“As people try to rebuild their nest eggs, the savings rate is bound to
remain higher than it was a few years ago. And what we spend our money
on will change, too; housing costs, which were the central cause of the
rise in Americans’ indebtedness in recent years, should eat up less of
our budgets in the future. But the evidence for a radical shift in the
way we consume seems more like the product of wishful thinking (there’s
a palpable longing among pundits for Americans to become more frugal)
than anything else. In many categories, spending has dropped only
slightly, if at all. And, while these are very tough times for
retailers who believed that spending could only go up, retail sales
rose briskly in August. Before we go proclaiming this the age of the
American tightwad, a little perspective is in order. Even after the
worst recession of the past seventy years, retail sales this year will
be about where they were in 2005. Does anyone really think that four
years ago Americans were misers?”

I don’t believe this is a binary equation, some people will have to become more frugal, others with more confidence and means will certainly get back to spending. The challenge is to understand who these different groups are.

Posted by Ed Cotton