Bank deposits rise 1,7 % in May - good news

Discussion in 'Economics' started by ASusilovic, Jun 26, 2009.

  1. June 26 (Bloomberg) -- Saks Fifth Avenue is cutting orders 20 percent after posting losses in the last four quarters. Kia Harris says some customers at the Washington shoe store where she works are buying one pair rather than three.

    In the recession following a borrowing binge that sent consumer debt to the highest level ever, Americans are shutting their wallets and building their nest eggs at the fastest pace in 15 years.

    While the trend will put the country’s finances in better balance and reduce its dependence on Chinese investment, it may also restrain economic growth in 2010 and beyond, said Lyle Gramley, a senior economic adviser with New York-based Soleil Securities Corp. and a former Federal Reserve governor.

    “There’s been a fundamental change in people’s behavior,” he said. “It will affect the economy for years.”

    Government data today showed that the household savings rate rose to 6.9 percent in May, the highest since December 1993, as personal spending increased less than incomes. The rate in April 2008 was zero.

    Most of the rise in income in May was due to one-time government stimulus payments to seniors, said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

    Americans’ newfound frugality is pinching airlines such as Chicago-based UAL Corp., which is cutting staff amid dwindling demand for leisure travel. Donations to charities dropped last year for the first time since 1987, and they’re in danger of declining further in 2009.

    ‘Not an Anchor’

    Banks are benefiting. Deposits grew 1.7 percent in May, the ninth-biggest monthly rise since 1973.

    Excellent news. I like that. US consumer saving, not spending. Although not good for overall economy but good in order to build a floor under excessive spending sprees in the last 16 years... :)